The Required Returns of Stocks X and Y Are RX

question 80

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 stock y and stock x have the same dividend yield, then stock y must have a lower expected capital gains yield than stock x.
• B) 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.
• C) the stocks must sell for the same price.
• D) stock y must have a higher dividend yield than stock x.
• E) 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.

---

Definitions:

Same Species

Organisms that belong to the same species are capable of interbreeding and producing fertile offspring.

Immune System

The body's defense system composed of organs, tissues, cells, and proteins that work together to fight off pathogens and foreign substances.

Sharks

Sharks are a group of elasmobranch fish characterized by their cartilaginous skeletons, five to seven gill slits on the sides of the head, and pectoral fins that are not fused to the head.