The figure given below shows the demand curves [D 1 and D 2 ] and the supply curve [S 1 ] of capital.Figure 17.1

-If the earnings report of a firm indicates higher earnings than was expected by the investors:

Question

The figure given below shows the demand curves [D 1 and D 2 ] and the supply curve [S 1 ] of capital.Figure 17.1
 
-If the earnings report of a firm indicates higher earnings than was expected by the investors:

Quizplus · Accepted Answer

Higher earnings than expected indicate that the firm is performing better than forecasted and investors will have an optimistic outlook on the firm's future prospects. This will result in an increase in demand for the firm's stocks, leading to a rise in stock prices. Therefore, the correct option is E - the stock prices of this firm will increase.

The Figure Given Below Shows the Demand Curves [D1 and D2]

The Figure Given Below Shows the Demand Curves [D₁ and D₂]