Stock X Is Expected to Pay a Dividend of $3

question 54

Multiple Choice

Stock X is expected to pay a dividend of $3.00 at the end of the year,i.e.,D₁ = $3.00,and that dividend is expected to grow at a constant rate of 6% a year.The stock currently trades at a price of $50 a share.Assume that the stock is in equilibrium,i.e.,the stock's price equals its intrinsic value.Which of the following statements is correct?

• A)The stock's required return is 10%.
• B)The stock's expected dividend yield and growth rate are equal.
• C)The stock's expected dividend yield is 5%.
• D)The stock's expected capital gains yield is 5%.

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Definitions:

Catatonic Schizophrenia

A subtype of schizophrenia characterized by periods of immobility or stupor, bizarre postures, or excessive, purposeless motor activity.

Disorganized Schizophrenia

A form of schizophrenia distinguished by chaotic speech, actions, and a lack of suitable emotional response.

Undifferentiated Schizophrenia

A subtype of schizophrenia characterized by mixed symptoms that do not clearly fit the criteria for other types of schizophrenia.

Somatoform Disorders

A group of mental disorders characterized by physical symptoms that suggest illness or injury, but which cannot be fully explained by a medical condition.