The required returns of Stocks X and Y are rX = 10% and rY = 12%. Which of the following statements is CORRECT?
A) if stock y and stock x have the same dividend yield, then stock y must have a lower expected capital gains yield than stock x.
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.
E) 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.
Correct Answer:
Verified
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