Question

Assume that a constant growth stock is currently selling at its equilibrium price of $52.50 per share. All else constant, if the required rate of return of the stock increases, the price of the stock will:

Answer 1

decreased

Step-by-step explanation:

As we know that there is a negative relationship between the rate of return i.e. required and the price of the stock. That means if the required rate of return rises, than the price of the stock reduced and vice versa

As in the given situation it is mentioned that the required rate of return increase so the price of the stock is decreased

The same is to be considered