The global 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.

Question

Quizplus · Accepted Answer

The global financial crisis lead to a decline in stock prices because investors expected a lowered dividend growth rate, which decreases the present value of future dividends and, hence, the stock price. B, C, and D are not correct as they all indicate factors that would lead to an increase in stock prices.

The Global Financial Crisis Lead to a Decline in Stock