Using the Constant Growth Model,an Increase in the Required Rate

question 21

Multiple Choice

Using the constant growth model,an increase in the required rate of return from 19 to 17 percent combined with an increase in the growth rate from 11 to 9 percent would cause the price to

• A) Fall more than 2%
• B) Fall less than 2%.
• C) Remain constant.
• D) Rise more than 2%.
• E) Rise less than 3%.

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Definitions:

Higher Rates

Refers to the increased costs or interest rates often associated with loans, investments, or other financial products.

Interest

The cost paid for borrowing money, typically expressed as an annual percentage rate.

Emergent Strategy

A strategy that unfolds in response to unexpected opportunities and challenges, rather than being planned from the start.

Environmental Changes

Alterations in the surrounding conditions including climate change, pollution, and natural habitat destruction that impact ecosystems and human societies.