Based on the dividend discount model, the current value of a stock will ____ as the discount rate is increased.

Question

Quizplus · Accepted Answer

According to the dividend discount model, the current value of a stock is inversely proportional to the discount rate. As the discount rate increases, the present value of future dividends decreases, leading to a decrease in the stock's current value. Therefore, the correct answer is D, which indicates that the current stock value decreases as the discount rate increases.

Based on the Dividend Discount Model, the Current Value of a Stock