QuestionJune 19, 2025

Which of the following should cause the price of a share of stock to rise? a. A reduction in market risk b. An increase in expected dividends c. A reduction in the interest rate d. All of the answer choices should cause the price to rise. e. None of the answer choices should cause the price to rise.

Which of the following should cause the price of a share of stock to rise? a. A reduction in market risk b. An increase in expected dividends c. A reduction in the interest rate d. All of the answer choices should cause the price to rise. e. None of the answer choices should cause the price to rise.
Which of the following should cause the price of a share of stock to rise?
a. A reduction in market risk
b. An increase in expected dividends
c. A reduction in the interest rate
d. All of the answer choices should cause the price to rise.
e. None of the answer choices should cause the price to rise.

Solution
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Answer

d. All of the answer choices should cause the price to rise. Explanation 1. Analyze the impact of market risk A reduction in market risk generally increases stock prices as investors require a lower return for holding less risky assets. 2. Analyze the impact of expected dividends An increase in expected dividends makes a stock more attractive, leading to a higher price due to increased demand. 3. Analyze the impact of interest rates A reduction in interest rates typically raises stock prices because alternative investments like bonds become less attractive, increasing demand for stocks.

Explanation

1. Analyze the impact of market risk<br /> A reduction in market risk generally increases stock prices as investors require a lower return for holding less risky assets.<br /><br />2. Analyze the impact of expected dividends<br /> An increase in expected dividends makes a stock more attractive, leading to a higher price due to increased demand.<br /><br />3. Analyze the impact of interest rates<br /> A reduction in interest rates typically raises stock prices because alternative investments like bonds become less attractive, increasing demand for stocks.
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