A soup manufacturer unexpectedly announces that it has hired a new manager. It is widely believed that this manager will raise the profitability of the corporation. At the same time interest rates unexpectedly rise. Which of the above would tend to make the price of the stock rise?
A)the announcement and the rise in interest rates
B)the announcement but not the rise in interest rates
C)the rise in interest rates, but not the announcement
D)neither the announcement nor the rise in interest rates

Question

Quizplus · Accepted Answer

The announcement of the new manager is likely to have a positive impact on the perception of the company's profitability, which may increase demand and drive up the stock price. The rise in interest rates, on the other hand, is generally associated with a decrease in stock prices as investors seek higher returns elsewhere. Therefore, the announcement of the new manager would outweigh the effect of the rise in interest rates and would tend to make the stock price rise.

A Soup Manufacturer Unexpectedly Announces That It Has Hired a New