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

question 50

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

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