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%.

---

Definitions:

Sensation

The process through which the senses pick up visual, auditory, and other sensory stimuli and transmit them to the brain.

Perception

The method through which people arrange and understand their sensory perceptions to assign significance to the world around them.

Difference Threshold

The smallest amount by which a stimulus must be changed in order to notice that the change has occurred, also known as the just noticeable difference (JND).

Stimulus Level

The intensity of a stimulus which may influence the response it elicits from an organism or process.