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Chapter 7 The Stock Market, the Theory of Rational Expectations, and the Efficient Markets Hypothesis 243

Question Status: New

30)

In asset markets, an asset’s price is

(a)

set equal to the average of the price all buyers are willing to pay.

(b)

set equal to the highest price a buyer is willing to pay.

(c)

set equal to the lowest price a seller is willing to accept.

(d)

set by the buyer willing to pay the highest price.

(e)

set equal to the highest price a seller will accept.

Answer:

Question Status: New

31)

New information about an asset can result in a decrease in the asset’s price due to

(a)

an expected decrease in the level of future dividends.

(b)

a decrease in the required rate of return.

(c)

an expected increase in the dividend growth rate.

(d)

an expected increase in the future sales price.

(e)

none of the above.

Answer:

Question Status: New

32)

A change in perceived risk of a stock changes

(a)

the expected dividend growth rate.

(b)

the expected sales price.

(c)

the required rate of return.

(d)

the current dividend.

(e)

all of the above.

Answer:

Question Status: New

33)

A stock’s price will fall if there is

(a)

an increase in perceived risk.

(b)

an increase in the required rate of return.

(c)

an increase in the future sales price.

(d)

all of the above.

(e)

both (a) and (b) of the above.

Answer:

Question Status: New

34)

A monetary expansion _____ stock prices due to a decrease in the _____ and an increase in the ____.

(a)

reduces; future sales price; expected rate of return

(b)

reduces; current dividend; expected rate of return

(c)

increases; required rate of return; future sales price

(d)

increases; dividend growth rate; future sales price

(e)

increases; required rate of return; dividend growth rate

Answer:

Question Status: New

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