Suppose That in 2009 the Expected Dividends of the Stocks

question 44

Multiple Choice

Suppose that in 2009 the expected dividends of the stocks in a broad market index equaled $240 million when the discount rate was 8% and the expected growth rate of the dividends equaled 6%.Using the constant growth formula for valuation,if interest rates increase to 9% the value of the market will change by _____.

• A) -10%
• B) -20%
• C) -25%
• D) -33%

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