13.4 Aerotech, an aerospace-technology research firm, announced this morning that it has hired the world’s most knowledgeable and prolific space researchers. Before today, Aerotech’s stock had been selling for $100.

a. What do you expect will happen to Aerotech’s stock?

b. Consider the following scenarios:

i. The stock price jumps to $118 on the day of the announcement. In subsequent days it floats up to $123 then falls back to $116.

ii. The stock price jumps to $116 and remains there.

iii. The stock price gradually climbs to $116 over the next week.

Which scenario(s) indicate market efficiency? Which do not? Why?