Using the Constant Growth Model, an Increase in the Required

question 59

Multiple Choice

Using the constant growth model, an increase in the required rate of return from 14 to 15 percent combined with an increase in the growth rate from 6 to 7 percent would cause the price to

• A) rise more than 1%.
• B) rise less than 1%.
• C) remain constant.
• D) fall more than 1%.
• E) fall less than 1%.