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The following is from a business report by the Reuters news agency: "Online retailer Overstock.com . . . posted a surprise quarterly profit and its shares jumped as much as 34 percent to their highest level in almost two years."

a. What is the relationship between a firm's profits and its stock price?

b. If the increase in Overstock's profits had not been a surprise, would the effect of the announcement on its stock price have been different? Briefly explain.

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