Stock X Has a Required Return of 12% and a Dividend

question 51

Multiple Choice

Stock X has a required return of 12% and a dividend yield of 5%,and its dividend is expected to grow at a constant rate forever.Stock Y has a required return of 10%,a dividend yield of 3%,and its dividend is expected to grow at a constant rate forever.Both stocks currently sell for $25 per share.Which of the following statements is correct?

• A)Stock Y pays a higher dividend per share than Stock X.
• B)Stock X pays a higher dividend per share than Stock Y.
• C)Stock Y has a lower expected growth rate than Stock X.
• D)Stock Y has the higher expected capital gains yield.

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Definitions:

Abnormal Behavior

Actions or reactions that are significantly different from what is considered typical or socially acceptable.

Vomits

The forceful expulsion of the contents of the stomach through the mouth, a reflex action to remove harmful substances.

Sleepiness

The state or condition of feeling a strong desire to sleep or being on the verge of falling asleep.