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?
$\begin{array}{lcc}
& \underline{X}& \underline{Y} \
\text { Price }&30\$ &30\$\
\text { Expected growth (constant) } & 6 \% &4\%\
\text { Required return } & 12 \% &10\%
\end{array}$
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.

Question

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?
 $\begin{array}{lcc}
& \underline{X}& \underline{Y} \
\text { Price }&30\$ &30\$\
\text { Expected growth (constant) } & 6 \% &4\%\
\text { Required return } & 12 \% &10\%
\end{array}$
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.

Quizplus · Accepted Answer

The correct answer is statement b. Both prices are currently the same, but X's price should grow at 6% vs. 4% for Y, so X's price should be higher a year from now.

Stocks X and Y Have the Following Data A) Stock Y Has a Higher Dividend Yield Than Stock