Holding all other variables constant, an increase in the market return will increase the value of a constant growth stock.

Question

Quizplus · Accepted Answer

The value of a constant growth stock is primarily determined by its dividend growth rate and the required rate of return (discount rate), not directly by the market return. An increase in market return could actually increase the required rate of return, potentially decreasing the stock's value.

Holding All Other Variables Constant, an Increase in the Market