Market Efficiency

The next three questions refer to this news item:

Satellite-radio firm Sirius XM posted earnings and showed some signs of improvement over last year. The company expanded its subscriber base following recession driven subscriber losses in the past year. Revenues were up to a record $629.6 million and losses narrowed to $181.9 million from $217 million the previous year.

Investors perceived the news to be positive and pushed stock prices up by about five percent to 64 cents a share. Analysts believe the company’s growth will slow significantly in the future but for the moment is driven by the sales of new cars that come equipped with satellite-radio service. The general consensus is that Sirius will have to become more efficient and slash costs to become profitable. In the meantime, the company continues to pursue subscribers via channels like the new Apple iPhone application released last week.

Source: Kharif, Olga, “Sirius XM: The Good and Bad Earnings News,” Business Week.

1. What should be the primary goal of Sirius XM management?

A. generate efficiency.

B. maximize profits.

C. minimize costs.

D. maximize stock price.

2. Stock prices responding instantly to the release of new information illustrate which of the following concepts?

A. investor acumen.

B. profitability.

C. market efficiency.

D. none of the above.

3. Which of the following is not a form of the efficient markets hypothesis?

A. semi-strong form.

B. weak form.

C. super-strong form.

D. strong form.