Assume That You Are Using the Dividend Growth Model to Value

question 27

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:

Arbitration

A type of alternative dispute resolution wherein disputes are submitted for resolution to private non-official persons selected in a manner provided by law or the agreement of the parties.

Dispute Resolution

The process of resolving disagreements between parties through negotiation, mediation, arbitration, or legal proceedings.

Private

Relating to or intended for an individual or group rather than the public or the state; not governmental.

Express Warranties

Are explicit, confirmed promises made by a seller to a buyer about the condition or quality of a product or service.