27. Using the constant growth model, a decrease in the required rate of return from 15 to 13 percent combined with an increase in the growth rate from 5 to 6 percent would cause the price to a. Rise more than 50%. b. Rise less than 50%. c. Remain constant. d. Fall more than 50%. e. Fall less than 50%. ANS: B %A = P/P = [(D)(1 + g)/(k - g)] [(D)(1 + g)/(k - g)] - 1 = [(D)(1 + 0.06)/(0.13 0.06)] = [(D)(1 + 0.05)/(0.15 0.05)] - 1 10.5) 144.22% < 50% (15.14