Everything else being the same, the greater an investor's required rate of return, what is true of the value of common stock?
A)It is worth more.
B)It is worth less.
C)The impact on value could be up or down.
D)The value will not change.

Question

Quizplus · Accepted Answer

The higher the required rate of return, the higher the discount rate applied to the expected cash flows from the common stock, which in turn reduces the present value of those cash flows. Therefore, the value of common stock decreases as the required rate of return increases.

Everything Else Being the Same, the Greater an Investor's Required