The CEO of High Tech International decides to change an ...

[mikaylakyoung]

The CEO of High Tech International decides to change an accounting method at the end of the
  current year. The change results in reported profits increasing by 5, but the company's cash flows
  are not changed.
 
  If capital markets are efficient, then
  A) the stock price will increase only if the accounting change will also result in higher profits in
  the next year.
  B) the stock price will not be affected by the accounting change.
  C) the stock price will decrease because accounting method changes are not permitted under
  generally accepted accounting principles.
  D) the stock price will increase due to higher profits.

Question 2

Insurance companies invest in the long-end of the securities market by purchasing securities with
  longer maturities. In which of the following instruments would an insurance company be least
  likely to invest most of its assets?
 
  A) corporate stocks B) mortgages
  C) corporate bonds D) commercial paper

[EAN94]

Answer to Question 1

B

Answer to Question 2

D