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.
Correct Answer:
Verified
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