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

question 69

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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Definitions:

Organization

An entity comprising multiple people, such as a corporation or partnership, formed for a collective goal.

Goal Setting

Goal setting involves defining specific, measurable objectives that a person or organization aims to achieve within a time frame.

Nonmonetary Information

Qualitative or information that cannot be easily quantified or expressed in monetary terms.

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The field of accounting that focuses on the summary, analysis, and reporting of financial transactions related to a business.