Assume 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.
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.
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.

Question

Quizplus · Accepted Answer

Assuming the dividend growth rate does not change, if the market rate of return increases, investors would demand a higher return on their investment. This would result in a decrease in the market values of all stocks to align with the increased market rate of return.

Assume You Are Using the Dividend Growth Model to Value