If a company's stock price (P₀) goes up, and nothing else changes, K_e (the required rate of return) should A) go up. B) go down. C) remain unchanged. D) More information is needed for an answer.

Question

Quizplus · Accepted Answer

If the stock price increases and nothing else changes, the expected return (dividends or capital gains) relative to the new price is lower, which means the required rate of return (K_e) should go down.

If a Company's Stock Price (P0) Goes Up, and Nothing

If a Company's Stock Price (P₀) Goes Up, and Nothing