The Current Expected Value of a Stock Is $32

question 19

Multiple Choice

The current expected value of a stock is $32. If investors demand a higher rate of return of 10% instead of the 8% rate of return, what will the impact on the stock price of the firm be?

• A) The stock price will increase by 10%.
• B) The stock price will not be affected by the change in the rate of return.
• C) The stock price will increase to $35.
• D) The stock price will reduce to zero.
• E) The stock price will decrease.

---

Definitions:

Net Income

The amount of money that remains after all operating expenses, interest, taxes, and preferred stock dividends have been deducted from a company's total revenue.

Assets

Resources owned or controlled by a business that are expected to produce future economic benefits.

Prepaid Rent

An asset account showing the amount of rent payments made ahead of time, indicating rent that has been paid but not yet incurred.

Tenant's Balance Sheet

A tenant's balance sheet is a financial statement that details a tenant's financial position at a given time, including assets, liabilities, and equity, specific to their rental obligations and resources.