The current expected value of a stock is $32. If investors demand a higher rate of return of 10% instead of the 8% rate of return, what will the impact on the stock price of the firm be?
A) The stock price will increase by 10%.
B) The stock price will not be affected by the change in the rate of return.
C) The stock price will increase to $35.
D) The stock price will reduce to zero.
E) The stock price will decrease.
Correct Answer:
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