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Stock X Is Expected to Pay a Dividend of $3

Question 38

Multiple Choice

Stock X is expected to pay a dividend of $3.00 at the end of the year,i.e.,D1 = $3.00,and that dividend is expected to grow at a constant rate of 6% a year.The stock currently trades at a price of $50 a share.Assume that the stock is in equilibrium,i.e.,the stock's price equals its intrinsic value.Which of the following statements is correct?


A) The stock's required return is 10%.
B) The stock's expected dividend yield and growth rate are equal.
C) The stock's expected dividend yield is 5%.
D) The stock's expected capital gains yield is 5%.

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