Fundamental analysis shows that Green Leaf Tea Company is fairly valued. Then Green Leaf Tea Company unexpectedly improves its production techniques and unexpectedly hires a new CEO away from another very successful tea producer. Suppose this has no effect on the price of the stock of Green Leaf Tea Company.
Answer

A. Fundamental analysis would now show the corporation is overvalued. The fact that the price was unchanged is consistent with the efficient markets hypothesis.
B. Fundamental analysis would now show the corporation is overvalued. The fact that the price was unchanged is not consistent with the efficient markets hypothesis.
C. Fundamental analysis would now show the corporation is undervalued. The fact that the price was unchanged is consistent with the efficient markets hypothesis.
D. Fundamental analysis would now show the corporation is undervalued. The fact that the price was unchanged is not consistent with the efficient markets hypothesis.

The correct answer is:
D. Fundamental analysis would now show the corporation is undervalued. The fact that the price was unchanged is not consistent with the efficient markets hypothesis.

(Note: The sudden improvement in technology and induction of a beterr, successful CEO would suggest that the company’s future profits or earnings would increase. Increased profit is a fundamental factor that should increase the fair value of the firm’s share. But market price failed to show up this improvement in fundamental factor. So, after this sudden happening, the share of the company remains undervalues (ie. valued less than the fair value which has increased)