Using the Constant Growth Model, an Increase in the Required

question 30

Multiple Choice

Using the constant growth model, an increase in the required rate of return from 17 to 20 percent combined with an increase in the growth rate from 8 to 11 percent would cause the price to

• A) rise more than 3%.
• B) rise less than 3%.
• C) remain constant.
• D) fall more than 3%.
• E) fall less than 3%.

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Widower

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