Stock X Is Expected to Pay a Dividend of $3

question 54

Multiple Choice

Stock X is expected to pay a dividend of $3.00 at the end of the year,i.e.,D₁ = $3.00,and that dividend is expected to grow at a constant rate of 6% a year.The stock currently trades at a price of $50 a share.Assume that the stock is in equilibrium,i.e.,the stock's price equals its intrinsic value.Which of the following statements is correct?

• A)The stock's required return is 10%.
• B)The stock's expected dividend yield and growth rate are equal.
• C)The stock's expected dividend yield is 5%.
• D)The stock's expected capital gains yield is 5%.

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Definitions:

Posterior Thigh

The back part of the thigh, comprising muscles like the hamstrings that are involved in extension of the hip and flexion of the knee.

Biceps Femoris

A muscle of the thigh that is part of the hamstring group, involved in knee flexion and thigh extension.

Tensor Fasciae Latae

A muscle of the thigh involved in stabilizing the hip and knee during movements.

Sternocleidomastoid

A neck muscle that facilitates the bending and turning of the head.