Based on the dividend-discount model, what do you think would happen to stock pr

Question

Based on the dividend-discount model, what do you think would happen to stock prices if there were a decrease in the perceived riskiness of commodities? If investors perceive commodities are less risky, then the relative riskiness of stocks will (Click to select) . Stocks would become relatively (Click to select)a attractive, requiring a Click o select risk premium than before. From the dividend-discount model, we can see at a Click to select in he risk premium would ead to a ci k to select in stock prices.

Explanation / Answer

Answer is: If investors perceive bonds are more risky, then the relative riskiness of stocks will fall.Stocks would become relatively more attractive, requiring a smaller risk premium than before.From the dividend discount model, we can see that a fall in the risk premium would lead to a rise in stock prices.

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