Stocks X and Y have the following data. Assuming the stock market is efficient and the stocks are in equilibrium, which of the following statements is CORRECT? Briefly explain your choice. Show work in excel X Y Price $30 $30 Expected growth (constant) 6% 4% Required return 12% 10% a. Stock Y has a higher dividend yield than Stock X. b. One year from now, Stock X's price is expected to be higher than Stock Y's price. c. Stock X has the higher expected year-end dividend. d. Stock Y has a higher capital gains yield. e. Stock X has a higher dividend yield than Stock Y.
Stocks X and Y have the following data. Assuming the stock market is efficient and the stocks are in equilibrium, which of the following statements is CORRECT? Briefly explain your choice. Show work in excel X Y Price $30 $30 Expected growth (constant) 6% 4% Required return 12% 10% a. Stock Y has a higher dividend yield than Stock X. b. One year from now, Stock X's price is expected to be higher than Stock Y's price. c. Stock X has the higher expected year-end dividend. d. Stock Y has a higher capital gains yield. e. Stock X has a higher dividend yield than Stock Y.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
Stocks X and Y have the following data. Assuming the stock
|
|
X |
Y |
|
Price |
$30 |
$30 |
|
Expected growth (constant) |
6% |
4% |
|
Required return |
12% |
10% |
|
a. |
Stock Y has a higher dividend yield than Stock X. |
|
b. |
One year from now, Stock X's price is expected to be higher than Stock Y's price. |
|
c. |
Stock X has the higher expected year-end dividend. |
|
d. |
Stock Y has a higher |
|
e. |
Stock X has a higher dividend yield than Stock Y. |
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Answer :
The correct answer is b. One year from now, Stock X's price is expected to be higher than Stock Y's price
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