What concerning the first trade after the announcement

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Problem 1: Reg Mombassa Ltd announced yesterday that its earnings would be 10 per cent lower than last year's earnings. The shares of Reg Mombassa Ltd earned an abnormal return of 1.2 percent yesterday. This result suggests that:

a) The market is not efficient.
b) Reg Mombassa's shares will probably rise in price tomorrow.
c) Investors expected the earnings decrease to be larger than was announced.
d) Investors expected the earnings decrease to be smaller than was announced.
e) The share market rose yesterday.

Problem 2: Gold Ltd made an unexpected announcement at 11:00 am that a new gold mine had been discovered. The share price established in the last trade before the announcement was 37 cents. The first trade after the announcement was also at 37 cents but the following trade took place at 52 cents, which became the new established price. Concerning the first trade after the announcement:

a) The buyer has made an abnormal profit.
b) The seller has made an abnormal profit.
c) The buyer has made a normal loss.
d) The seller has made a normal profit.
e) The seller has made a normal loss.

Reference no: EM132931488

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