Using the Constant Growth Model, an Increase in the Required

question 42

Multiple Choice

Using the constant growth model, an increase in the required rate of return from 14 to 15% combined with an increase in the growth rate from 6 to 7% 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:

Learning

The method of obtaining new comprehension, knowledge, conduct, capabilities, beliefs, or inclinations.

Homeostasis

The process by which living organisms maintain a stable internal environment to function effectively, despite external changes.

Drive-reduction Theory

A theory of motivation that proposes an individual's behavior is an external display of the desire to satisfy physiological needs.

Thanksgiving Dinner

A traditional North American meal celebrated on Thanksgiving, featuring turkey, stuffing, cranberry sauce, and other dishes associated with the holiday.