The Required Returns of Stocks X and Y Are R_X

question 10

Multiple Choice

The required returns of Stocks X and Y are r_X = 10% and r_Y = 12%.Which of the following statements is CORRECT?

• A) 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.
• B) 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.
• C) 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.
• D) The stocks must sell for the same price.
• E) Stock Y must have a higher dividend yield than Stock X.

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Definitions:

Phosphorus

A chemical element that plays a vital role in biological processes such as energy transfer, genetic information processing, and bone formation.

Phosphorus

A reactive, nonmetallic chemical element with the symbol P, essential for life, playing a key role in cellular energy transfer and nucleic acid synthesis.

Sedimentary Rock

Rock formed from the accumulation and compaction of mineral and organic particles on the Earth's surface, often containing fossils.

Primary Consumers

Organisms that directly consume producers, such as plants or algae, and serve as a food source for higher trophic levels in an ecosystem.