The value of a bank's stock will tend to rise if the:
A)stream of future stockholder dividends is expected to increase.
B)financial organization's perceived level of risk falls.
C)market interest rates decrease.
D)expected dividend increases are combined with declining risk,as perceived by investors.
E)All of the options are correct.

Question

Quizplus · Accepted Answer

All of the options listed can contribute to an increase in the value of a bank's stock. If the stream of future dividends is expected to increase, this indicates a positive outlook for the bank's profitability and future prospects, which can attract investors and drive up demand for the stock, increasing its price. Similarly, if the perceived level of risk falls, the bank is seen as a safer investment and investors may be willing to pay more for its stock. A decrease in market interest rates can also increase demand for the stock as investors seek out higher yields, and if expected dividend increases are combined with declining risk, this can create a particularly favorable outlook that can drive up the stock's value. Therefore, all of these factors can contribute to an increase in a bank's stock value.

The Value of a Bank's Stock Will Tend to Rise