Suppose that in 2018 the expected dividends of the stocks in a broad market index equaled $240 million when the discount rate was 8% and the expected growth rate of the dividends equaled 6%. Using the constant-growth formula for valuation, if interest rates increase to 9%, the value of the market will change by ________.

Question

Quizplus · Accepted Answer

Original value = 11eaaae8_8b4e_e767_a4b8_ed055e4f7c7d_TB6474_11 = 12,000 Million
New value = 11eaaae8_8b4e_e768_a4b8_c3bdbf7ec920_TB6474_11 = 8,000 Million
%△ = 11eaaae8_8b4f_0e79_a4b8_094b9e913fb3_TB6474_11 = -33.33%

Suppose That in 2018 the Expected Dividends of the Stocks