If a rising level of interest rates causes the nominal discount rate for equity to increase, the market price of bank stock will ________, holding all else the same.

Question

Quizplus · Accepted Answer

When the nominal discount rate for equity increases, it means the required return on equity investments is higher. This leads to a decrease in the present value of future cash flows from the stock, causing the market price of the stock to decrease, all else being equal.

If a Rising Level of Interest Rates Causes the Nominal