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2 May, 02:09

Which of the following (all other factors held constant) will cause an increase in a stock's value?

A) An increase in the risk-free rate

B) A decrease in the stock's beta

C) An increase in the market risk premium

D) A decrease in the constant growth rate in dividends

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Answers (1)
  1. 2 May, 03:34
    0
    B, a decrease in the stock's beta.

    Explanation:

    A stock's beta is the determination of the stock's volatility in comparison with the market.

    Simply put, it is the determination of how easily a stock will crash. The lower the beta of a stock, the less likely it is to be volatile.

    Mostly, stocks with a volatility below 1.0 is less volatile compared to stocks with a beta above 1.0.

    The beta of a stock is calculated by finding the rate, the rate of return and the market rate of return of the stock. All of these above are to expressed as a percentage. Having gotten the percentages from above, the risk free rate is subtracted from the rate of return of the stock. After that, the risk free rate is also subtracted from the market rate of return.

    The value from the first subtraction is divided by the value from the second subtraction.

    Cheers.
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Home » Business » Which of the following (all other factors held constant) will cause an increase in a stock's value? A) An increase in the risk-free rate B) A decrease in the stock's beta C) An increase in the market risk premium D) A decrease in the constant growth
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