The Required Returns of Stocks X and Y Are RX

question 16

Multiple Choice

The required returns of Stocks X and Y are rX = 10% and rY = 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:

Self-Sacrifice

The act of giving up one's own interests, desires, or well-being for the benefit of others or for a cause.

Individual Survival

The ability of an organism to endure and continue living in its environment through adaptation, resource acquisition, and avoiding risks.

Nonviolence

A philosophy or strategy of conflict resolution that rejects the use of physical violence in order to achieve social or political change.

Moral Reasoning

The process through which individuals make decisions about what is right or wrong, based on ethical principles.