The Required Returns of Stocks X and Y Are R_X

question 10

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 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.

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Definitions:

Instrumental Aggression

Aggressive behavior used as a means to achieve a goal or gain something of value, rather than for the sake of aggression itself.

Verbal Aggression

involves expressing negative feelings or thoughts through words to attack or abuse someone else.

Psychopathic

Pertaining to a personality disorder characterized by persistent antisocial behavior, impaired empathy, and bold, disinhibited, and egotistical traits.

Undercontrolled

Describes a lack of restraint or an inability to regulate one’s emotions, impulses, or behaviors effectively.