Stocks A and B have the same required return and the same price,$25.Stock A's dividend is expected to grow at a constant rate of 10% per year,while Stock B's dividend is expected to grow at a constant rate of 5% per year.Which of the following statements is correct?
A) Stock A's expected dividend at t = 1 is only half that of Stock B.
B) Stock A has a higher dividend yield than Stock B.
C) Currently the two stocks have the same price, but over time Stock B's price passes that of Stock A.
D) Since Stock A's growth rate is twice that of Stock B, Stock A's future dividends will always be twice as high as Stock B's.
Correct Answer:
Verified
Q22: If markets are in equilibrium,which of the
Q23: Companies can issue different classes of common
Q24: Stocks A and B have the same
Q25: Which of the following statements is correct?
A)The
Q26: Which statement regarding the efficient markets hypothesis
Q28: Stock X has a required return of
Q29: If a stock's dividend is expected to
Q30: Why is the preemptive right important to
Q31: The expected return on Northeast Corporation's stock
Q32: Which of the following statements is correct?
A)The
Unlock this Answer For Free Now!
View this answer and more for free by performing one of the following actions
Scan the QR code to install the App and get 2 free unlocks
Unlock quizzes for free by uploading documents