If a Stock's Dividend Is Expected to Grow at a Constant

question 47

Multiple Choice

If a stock's dividend is expected to grow at a constant rate of 5% a year,which of the following statements is CORRECT? The stock is in equilibrium.

• A)The expected return on the stock is 5% a year.
• B)The stock's dividend yield is 5%.
• C)The price of the stock is expected to decline in the future.
• D)The stock's required return must be equal to or less than 5%.
• E)The stock's price one year from now is expected to be 5% above the current price.

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Definitions:

Amino Acids

Organic compounds that serve as the building blocks of proteins, necessary for health and vital processes in the body.

Energy

The capacity to do work or cause physical change; exists in various forms such as kinetic, potential, thermal, electrical, chemical, nuclear, and others.

Glutamic Acid

An amino acid that functions as a building block for proteins and acts as an important neurotransmitter in the brain.

Transamination

A biochemical process where an amino group is transferred from one amino acid to a keto acid, leading to the formation of a new amino acid.