Under the Efficient Markets Hypothesis, What Will Be the Percentage

question 35

Multiple Choice

Under the efficient markets hypothesis, what will be the percentage change in the stock price of a company whose current dividend is $10.00 and whose dividends had been expected to grow by 3% but now are expected to grow by 4% per year?

• A)4.0%
• B)17.8%
• C)25.0%
• D)33.3%

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Definitions:

Coupon Rates

The interest rate on a bond, determining the periodic interest payment to the bondholder.

Market Rates

are the prevailing interest rates or prices for services, securities, or commodities in the open market.

Premium

The amount paid for an insurance policy or the amount by which a bond or stock sells above its face value.

Par

Par value, often referred to simply as "par," is the face value of a bond or the stock value stated in the corporate charter, not necessarily its market value.