Question

Answer this question based on the dividend growth model. If you expect the market rate of return to increase across the board on all equity securities, then you should also expect:

Answer 1

If one expects the market rate of return to increase across the board on all equity securities, then one should also expect an increase in all stock values.

Dividend Growth Model

• Investors can use the dividend growth model, a mathematical technique, to calculate a realistic fair value for a company's stock based on its present payout and anticipated dividend growth in the future.
• The fair value of a company is determined using a valuation method known as the dividend growth model, which makes the assumption that dividend growth will either be constant through time or will vary depending on the current period.
• The dividend growth model has the benefit of offering a straightforward approach to assessing a stock's fundamental worth. Investors are able to contrast the prices of stocks issued by businesses in various industries.
• All stock values should rise if one anticipates an increase in the market rate of return for all equity assets as a whole.

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