Stock X Has a Required Return of 10%,while Stock Y

question 6

Multiple Choice

Stock X has a required return of 10%,while Stock Y has a required return of 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 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.
• C)The stocks must sell for the same price.
• D)Stock Y must have a higher dividend yield than Stock X.

---

Definitions:

Partnership Agreement

A legal document that specifies the rights, responsibilities, and distribution of profits and losses among partners in a business partnership.

Salary Allowances

Salary allowances refer to the specific amounts granted to employees over their basic salary for various purposes, such as housing, transportation, or medical expenses.

Income Statements

A financial statement that shows a company's revenues and expenses over a specific period, leading to net profit or loss.

Drawing Accounts

Accounts used to track withdrawals made by the owners of a business for personal use, reducing the owner's equity in the company.