The price of a stock will increase,ceteris paribus,when

Question

Quizplus · Accepted Answer

Future earnings expectations are a major determinant of stock prices. If the market expects a company to perform well in the future, the current price of its stock will increase. Conversely, if the market has low expectations for a company's earnings, the current price of its stock will decrease.

B) The interest rate has an inverse relationship with stock prices. When interest rates rise, investors can earn a higher return on risk-free investments like bonds, and may move their money out of stocks, causing prices to fall.

C) The supply of a stock has no direct relationship with its price. It is the demand for the stock that drives its price. If there is high demand for a stock, its price will increase regardless of the supply. Conversely, if demand is low, the price will fall regardless of the supply.

The Price of a Stock Will Increase,ceteris Paribus,when