A bank's stock price will tend to rise if the:
A)value of the stream of future stockholder dividends is expected to increase.
B)banking organization's perceived level of risk increases.
C)expected dividends decrease.
D)All of the options are correct.
E)None of the options is correct.

Question

Quizplus · Accepted Answer

A bank's stock price is directly related to the value of the stream of future stockholder dividends. If investors expect that the bank will pay out larger dividends in the future, they will be willing to pay more for the stock, driving up the price. Conversely, if expected dividends decrease, the stock price will tend to fall. The bank's perceived level of risk is not directly related to its stock price, although it can be a factor that investors consider when deciding whether or not to invest in the bank.

A Bank's Stock Price Will Tend to Rise If The