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:

Participant Observation

Involves carefully observing people’s face-to-face interactions and actually participating in their lives over a long period, thus achieving a deep and sympathetic understanding of what motivates them to act in the way they do.

Social Milieu

The social environment consisting of culture, traditions, and social structures that influence an individual's behavior and perceptions.

Hawthorne Effect

The alteration of behavior by study subjects due to their awareness of being observed.

Overgeneralization

Overgeneralization involves making broad conclusions or generalizations from specific observations or limited evidence, often leading to inaccurate or misleading outcomes.