The constant-growth model uses the market price as a reflection of the expected risk-return preference of investors in the market place.

Question

Quizplus · Accepted Answer

The constant-growth model, also known as the Gordon growth model, assumes that the stock's dividend will grow at a constant rate and uses the market price to reflect the expected risk-return preference of investors. Therefore, the statement is true.

The Constant-Growth Model Uses the Market Price as a Reflection