Relative Prices Describe _____

question 155

Multiple Choice

Relative prices describe _____

• A) how some prices would increase and some would decrease.
• B) how much one good costs compared to another.
• C) how prices move in unison.
• D) prices change according to the value of the dollar.
• E) complicated international transactions.

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Definitions:

Dividend Growth Model

A model that estimates the value of a dividend-paying stock, based on the assumption that its dividends will continue to grow at a constant rate in the foreseeable future.

Cost of Equity

The return that investors expect for investing in a company's equity, representing the compensation for their risk.

SML Approach

Security Market Line approach; a graphical representation of the expected return of investments as a function of their systematic, non-diversifiable risk.

Cost of Capital

The rate of return that a company must earn on its investments to maintain its market value and satisfy its shareholders or debtholders.