Consider the bull market, led in large part by the strong performance of tech stocks, that existed in the US in July 1997. On 17 July of that year, the Dow hit one in a long series of record highs at it exceeded 8000 (8038.88, to be exact to put that into perspective, consider that it stayed mostly in the 2000s during the preceding decade). A number of contributing factors have been credited, at least partially, for this strong performance:

Low interest rates

High dividends

High projected dividend growth We will consider each of these factors separately in the questions that follow.

Consider the factor of low-interest rates that existed during the bull market in July 1997. Which of the following accurately describes the role these low-interest rates played in high stock prices?

A. increased, causing an increase in the denominator of the Gordon growth model equation

B. increased, causing a decrease in the denominator of the Gordon growth model equation

C. decreased, causing an increase in the denominator of the Gordon growth model equation

D. decreased, causing a decrease in the denominator of the Gordon growth model equation

Now consider the factor of high dividends that existed during the bull market of July 1997. Which of the following accurately describes the role these high dividends played in high stock prices?

A. was low, causing a decrease in the numerator of the Gordon growth model equation

B. was low, causing an increase in the numerator of the Gordon growth model equation

C. was high, causing an increase in the numerator of the Gordon growth model equation

D. was high, causing a decrease in the numerator of the Gordon growth model equation

Finally, consider the factor of high projected dividend growth that existed during the bull market of July 1997. Which of the following accurately describes the role this high projected dividend growth played in high stock prices?

A. was high, causing a decrease in the numerator and an increase in the denominator of the Gordon growth model equation

B. was high, causing an increase in the numerator and a decrease in the denominator of the Gordon growth model equation

C. was low, causing a decrease in the numerator and an increase in the denominator of the Gordon growth model equation

D. was low, causing an increase in the numerator and a decrease in the denominator of the Gordon growth model equation