The greater a corporation's expected profit,other things constant,the _____ the value of shares on the stock market and the _____the interest rate that would have to be paid on new bond issues.

Question

Quizplus · Accepted Answer

A corporation's expected profit is a major factor that determines the value of its shares in the stock market. When expected profit is high, investors are willing to pay more for the shares, resulting in a higher share value. Additionally, high expected profit indicates that the corporation is more creditworthy, which could lower the interest rate on new bond issues. Therefore, a higher share value and lower interest rate would result from higher expected profit, other things constant.

The Greater a Corporation's Expected Profit,other Things Constant,the _____ the Value