In a well-functioning financial market, the prices of a company's stocks and bonds will rise
A)only after it's reported profits rise.
B)if an event boosts its expected future profit.
C)only in the presence of asymmetric information.
D)when its asset become less liquid.

Question

Quizplus · Accepted Answer

In a well-functioning financial market, prices of a company's stocks and bonds will rise if an event occurs that boosts its expected future profit. This can include positive news about the company's financial performance, such as higher revenues or earnings, as well as other factors such as a new product launch or a strategic acquisition. It is not necessarily dependent on asymmetric information or decreased liquidity of the company's assets.

In a Well-Functioning Financial Market, the Prices of a Company's