Which of the Following Statements Is Most Correct

question 28

Multiple Choice

Which of the following statements is most correct?

• A) Assume that the required rate of return on a given stock is 13 percent. If the stock's dividend is growing at a constant rate of 5 percent, its expected dividend yield is 5 percent as well.
• B) The dividend yield on a stock is equal to the expected return less the expected capital gain.
• C) A stock's dividend yield can never exceed the expected growth rate.
• D) All of the answers above are correct.
• E) Answers b and c are correct.

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Definitions:

Demand Occurs

The moment at which consumers are willing and able to purchase a good or service at a given price.

Long-Run Equilibrium

A state in which all factors of production and costs are variable, and firms in the industry are earning only normal profits, with no incentive for entry or exit.

Inferior Good

A good or service whose consumption declines as income rises, prices held constant.

Constant Costs

Costs that remain unchanged regardless of the level of production or activity.