Which of the Following Statements Is CORRECT,assuming Stocks Are in Equilibrium

question 82

Multiple Choice

Which of the following statements is CORRECT,assuming stocks are in equilibrium?

• A) The dividend yield on a constant growth stock must equal its expected total return minus its expected capital gains yield.
• B) Assume that the required return on a given stock is 13%.If the stock's dividend is growing at a constant rate of 5%,then its expected dividend yield is 5% as well.
• C) A stock's dividend yield can never exceed its expected growth rate.
• D) A required condition for one to use the constant growth model is that the stock's expected growth rate exceed its required rate of return.
• E) Other things held constant,the higher a company's beta coefficient,the lower its required rate of return.

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Definitions:

Solve For R

A common phrase in finance and mathematics referring to the process of finding the rate of interest or return.

Nearest Hundredth

A term referring to rounding a number to the second decimal place to make it closer to the exact value by hundredths.

Six-Figure Accuracy

A level of precision in numerical calculations where values are correct to within one part in a hundred thousand.

Superscript

A character that is set slightly above the normal line of type, often used in mathematical expressions to denote an exponent or to distinguish different variables.