The Required Returns of Stocks X and Y Are R_X

question 16

Multiple Choice

The required returns of Stocks X and Y are r_X = 10% and r_Y = 12%.Which of the following statements is CORRECT?

• A) 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.
• B) 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.
• C) The stocks must sell for the same price.
• D) Stock Y must have a higher dividend yield than Stock X.
• E) 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.

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Definitions:

Rating Scale

A method for assigning a value to a variable or a performance level, often for the purpose of evaluation or assessment.

Rater

An individual who evaluates and provides feedback on the performance of others, commonly used in contexts of employee performance reviews, assessments, and surveys.

Management-by-objectives

A performance management approach where managers and employees work together to set, record, and monitor goals for a specific period, aiming to improve organizational performance.

Performance Appraisals

An evaluative process in which the performance of an employee is periodically reviewed and discussed, aiming to identify strengths, areas for improvement, and the alignment with overall organizational goals.