Question
Stock M has a required return of 10.00%, while Stock Z has a required return of 5.00%. Which of the following statements is CORRECT? a.
Stock M has a required return of 10.00%, while Stock Z has a required return of 5.00%. Which of the following statements is CORRECT?
a. If Stock M and Stock Z have the same current dividend and the same expected dividend growth rate, then Stock M must sell for a higher price.
b. Stock M must have a higher dividend yield than Stock Z.
c. The stocks must sell for the same price.
d. If the market is in equilibrium, and if Stock M has the lower expected dividend yield, then it must have the higher expected growth rate.
e. If Stock M and Stock Z have the same dividend yield, then Stock M must have a lower expected capital gains yield than Stock Z.
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