As the risk-free rate increases, the required rate of return for common stock decreases.
"K" is utilized in all cost of capital decisions and bears a direct relationship to increases and decreases in R_f.

Question

Quizplus · Accepted Answer

The statement is incorrect. The required rate of return for common stock typically increases as the risk-free rate increases, not the other way around. Additionally, while "K" is commonly used in cost of capital decisions, it does not have a direct relationship to changes in RSf.

As the Risk-Free Rate Increases, the Required Rate of Return