The common stock of the Kenwith Co.pays a constant annual dividend.Thus,the market price of Kenwith stock will:

Question

Quizplus · Accepted Answer

The market price of a stock is influenced by the expected future cash flows from the stock, which include dividends and the expected future selling price. If the market rate of return increases, investors will demand a higher return from Kenwith stock to compensate for the higher opportunity cost of investing in other stocks with higher rates of return. This will lead to a decrease in the market price of Kenwith stock, as the constant dividend payment will become less attractive relative to other investment opportunities. Therefore, the correct answer is A.

The Common Stock of the Kenwith Co