An increase in the required return on the stock will cause a(n) _____ in its price.

Name: An increase in the required return on the stock will cause a(n) _____ in its price.
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Question

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According to the dividend discount model, the stock price is inversely related to the required return on the stock. As the required return increases, the present value of future cash flows decreases, causing the stock price to decrease. Therefore, an increase in the required return on the stock will cause a decrease in its price.

An Increase in the Required Return on the Stock Will