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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? X Y Price $25 $25 Expected dividend yield 5% 3% Required return 12% 10% a. Stock X pays a higher dividend per share than Stock Y. b. Stock Y pays a higher dividend per share than Stock X. c. Stock Y has a lower expected growth rate than Stock X. d. One year from now, Stock X should have the higher price. e. Stock Y has the higher expected capital gains yield.

Respuesta :

jepessoa

Answer:

a. Stock X pays a higher dividend per share than Stock Y.

Explanation:

stock x, dividend = $1.25

$25 = $1.25 / (12% - g)

12% - g = $1.25 / $25

12% - g = 5%

g = 7%

stock y, dividend = $0.75

$25 = $0.75 / (10% - g)

10% - g = $0.75 / $25

10% - g = 3%

g = 7%

both growth rates are equal, what varies are the dividends that the stocks yield and the required rates of return

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