70. New Labs just announced that it has received a patent for a product that wil

Question

70. New Labs just announced that it has received a patent for a product that will eliminate all flu viruses. This news is totally unexpected and viewed as a major medical advancement. Which one of the following reactions to this announcement indicates the market for New Labs stock is efficient? A. The price of the New Labs stock remains unchanged. B. The price of New Labs stock increases rapidly and then settles back to its pre-announcement level. C. The price of New Labs stock increases rapidly to a higher price and the remains at that price. D. All stocks quickly increase in value and then all but New Labs fall back to their original values. E. The value of all stocks suddenly increase and then level off at their higher values.

Explanation / Answer

The company just received a patent for a product that will eliminate all the flu viruses.

This is major medical advancement for the company. As a result the company comes in the limelight.

As a result the price of the new labs stock increases rapidly to a higher price and remains at that price.

Hence, the correct option is C.

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