The required returns of Stocks X and Y are rX = 10% and rY = 12%. Which of the f
ID: 2688277 • Letter: T
Question
The required returns of Stocks X and Y are rX = 10% and rY = 12%. Which of the following statements is CORRECT? Question options: a) If the market is in equilibrium, and if Stock Y has the lower expected dividend yield, then it must have the higher expected growth rate. b)If Stock Y and Stock X have the same dividend yield, then Stock Y must have a lower expected capital gains yield than Stock X. c) If Stock X and Stock Y have the same current dividend and the same expected dividend growth rate, then Stock Y must sell for a higher price. d) The stocks must sell for the same price. e) Stock Y must have a higher dividend yield than Stock X.Explanation / Answer
The correct answer: If the market is in equilibrium, and if Stock Y has the lower expected dividend yield, then it must have the higher expected growth rate. Since X has the lower required return, if Y has a lower dividend yield it must have a higher expected growth rate.this is according to the finance test I just took The correct answer: If the market is in equilibrium, and if Stock Y has the lower expected dividend yield, then it must have the higher expected growth rate.