Question

Fundamental analysis shows that Quadrangle Company is fairly valued. Then Quadrangle Company unexpectedly improves its production techniques and unexpectedly hires a new CEO away from another very successful competitor. Suppose this has no effect on the price of the stock of Quadrangle Company.
a. Fundamental analysis would now show the corporation is overvalued. The fact that the price was unchanged is consistent with the efficient markets hypothesis.
Incorrect Response

b. Fundamental analysis would now show the corporation is overvalued. The fact that the price was unchanged is not consistent with the efficient markets hypothesis.

c. Fundamental analysis would now show the corporation is undervalued. The fact that the price was unchanged is consistent with the efficient markets hypothesis.

d. Fundamental analysis would now show the corporation is undervalued. The fact that the price was unchanged is not consistent with the efficient markets hypothesis.

Answer 1

Answer:

D. Fundamental analysis would now show the corporation is undervalued. The fact that the price was unchanged is not consistent with the efficient markets hypothesis.

Explanation:

Under factors of production, we have Land ,labour ,capital and entrepreneur.

Labour are the prime movers of a business.If a new CEO with a good track record has been employed, then the value of the company will increase.

Technically, that Quadrangle Company has increased its production(which might mean that the goods and services they deliver to their clients has increased or the mode of delivery of services has been improved upon), the value is also meant to increase.

With all these indices in place, fundamental analysis will now show that the corperation is undervalued. so D

Fundamental analysis would now show the corporation is undervalued. The fact that the price was unchanged is not consistent with the efficient markets hypothesis

perfectly fits the answer