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%.

---

Definitions:

American Reformers

Individuals or groups in the United States who advocate for or cause social, political, economic, or environmental changes to address perceived issues within society.

Banning Alcohol

The legal prohibition of the manufacture, transportation, and sale of alcohol, notably exemplified by the Prohibition era in the United States from 1920 to 1933.

Populist Movement

A political movement in the late 19th century that sought to represent the interests of farmers and laborers against the elites and big business.

Origins

Origins refers to the beginning or source of something, often explaining its creation, initial purpose, or the inception of ideas, objects, or phenomena.