Assume That You Are Using the Dividend Growth Model to Value

question 119

Multiple Choice

Assume that you are using the dividend growth model to value stocks. If you expect the market rate of return to increase across the board on all equity securities, then you should also expect the:

• A) Market values of all stocks to increase, all else constant.
• B) Market values of all stocks to remain constant as the dividend growth will offset the increase in the market rate.
• C) Market values of all stocks to decrease, all else constant.
• D) Stocks that do not pay dividends to decrease in price while the dividend-paying stocks maintain a constant price.
• E) Dividend growth rates to increase to offset this change.

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Definitions:

Conception

The moment when a sperm fertilizes an egg, leading to the beginning of pregnancy.

Testicular

Related to the testes, the male reproductive glands that produce sperm and testosterone.

Uterus

A female reproductive organ in mammals, including humans, where offspring are conceived and in which they gestate before birth.

Genetic Defect

A hereditary condition resulting from an abnormality in an individual's DNA.