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A stock's price will fall if there is ____.
A) a decrease in perceived risk
B) an increase in the required rate of return
C) an increase in the future sales price
D) current dividends are high
Answer: B
Diff: 2 Type: MC Page Ref: 142
Skill: Applied
Objective List: 7.2 Determine how information in the market affects asset prices
A monetary expansion ____ stock prices due to a decrease in the ____ and an
increase in the ____, everything else held constant.
A) reduces; future sales price; expected rate of return
B) reduces; current dividend; expected rate of return
C) increases; required rate of return; future sales price
D) increases; required rate of return; dividend growth rate
Answer: D
Diff: 3 Type: MC Page Ref: 143
Skill: Applied
Objective List: 7.2 Determine how information in the market affects asset prices
The subprime financial crisis lead to a decline in stock prices because ____.
A) of a lowered expected dividend growth rate
B) of a lowered required return on investment in equity
C) higher expected future stock prices
D) higher current dividends
Answer: A
Diff: 2 Type: MC Page Ref: 143
Skill: Applied
Objective List: 7.2 Determine how information in the market affects asset prices
Increased uncertainty resulting from the subprime crisis ____ the required return on
investment in equity.
A) raised
B) lowered
C) had no impact on
D) decreased
Answer: A
Diff: 3 Type: MC Page Ref: 143
Skill: Applied
Objective List: 7.2 Determine how information in the market affects asset prices