QUESTION 53

[Bonus Question] Assume the investors' required return for a stock decreases from 13% to 10%. What happens to the price of the stock? Why would the price change?

		a. The price would rise; investors see less risk in the stock, hence a higher price.
		b. The price would fall; investors see more risk in the firm and demand a higher return hence a lower price.
		c. The price would not change; changes in the required return do not affect stock prices.