Author Question: Stocks X and Y sell at the same price. Stock X has a required return of 13% while Stock Ys required ... (Read 70 times)

stananza · **on:** Aug 7, 2023

Stocks X and Y sell at the same price. Stock X has a required return of 13% while Stock Y’s required return is 20%. Stock X’s dividend is expected to grow at a constant rate of 5% a year, while Stock Y’s dividend is expected to grow at a constant rate of 12%. If the market is in equilibrium so that expected returns equal required returns, which of the following statements is correct?

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Stock X has a higher dividend yield than Stock Y.

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Stock Y has a higher dividend yield than Stock X.

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Stock Y has a lower capital gains yield.

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One year from now, Stock X’s price is expected to be lower than Stock Y’s price.

katrey9207 · **Reply #1 on:** Aug 7, 2023

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