You own a stock of Smith Inc Global. The most recent dividend this company paid was 2 USD. You expect dividends to grow at a constant 2% rate forever. Your required rate of return on equity is the interest rate set by the Federal Reserve. The Federal Reserve just raised interest rates from 3% to 4%. Suppose you know for certain that for each percentage point of higher interest rates, the expected growth rate of dividends falls by 1 percentage point. By how much has the stock price changed after the interest rate change by the Fed, relative to before the interest rate change?(Hint: in the relevant textbook formula, assume that D0 is 2USD)

A.

The stock price has not changed

B.

There is not enough information to compute the change in the stock price

C.

The stock price fell by roughly 67 USD

D.

The stock price increased by roughly 67 USD

E.

The stock price increased by roughly 137 USD

F.

The stock price fell by roughly 137 USD