Final answer:
The value of a company's stock can be affected by rumors of a government contract as it shifts investor expectations about the future performance and profitability of the company, leading to changes in stock demand and price.
Step-by-step explanation:
The rumor of a government contract could change the value of a company's stock because stock prices are deeply influenced by expectations about the company's future performance. Investors react to news, like potential government contracts, that could imply greater future profits or stability. When the market believes a company's prospects have improved, there is usually an increase in investor demand for the stock, driving up its price. On the other hand, if the market expects poor performance, a decrease in stock value is likely. Hence, finding a company believed to have poor prospects that will actually succeed is vital. However, speculation can also lead to rapid changes in stock prices, as seen in market collapses when the reality deviates significantly from optimistic expectations.