Stock X Has the Following Data

question 20

Multiple Choice

Stock X has the following data. Assuming the stock market is efficient and the stock is in equilibrium, which of the following statements is CORRECT?

• A) The stock's required return is 10%.
• B) The stock's expected dividend yield and growth rate are equal.
• C) The stock's expected dividend yield is 5%.
• D) The stock's expected capital gains yield is 5%.
• E) The stock's expected price 10 years from now is $100.00.

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Definitions:

EAFE

An acronym for Europe, Australasia, and Far East, and it refers to a stock index that is designed to measure the equity market performance in those regions.

Forward Rate

The interest rate agreed upon today for a loan that will occur at a future date, used in the calculation of the yield curve and in the pricing of forward contracts.

Canadian Security

A financial instrument issued in Canada, such as stocks, bonds, or investment funds.

Exchange Rate

The worth of a currency when exchanged for a different one.