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If Stock Prices Are In-Line with Their Fundamental Determinants and Profit

Question 34

Multiple Choice

If stock prices are in-line with their fundamental determinants and profit expectations do not change, then a change in the interest rate by one percentage point from 10% to 11%


A) will change the stock price by exactly ten percent regardless of the expected distribution of the earnings over time.
B) will change the stock price by less than ten percent regardless of the expected distribution of the earnings over time.
C) will change the stock price by more than ten percent regardless of the expected distribution of the earnings over time.
D) will change the stock price by more or less than ten percent depending on the expected distribution of the earnings over time.

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