Question
You have researched Stock A and Stock B, and come up with the following information. Dividends are expected to grow at a constant rate for
You have researched Stock A and Stock B, and come up with the following information. Dividends are expected to grow at a constant rate for both stocks. Assuming the market is in equilibrium, pick the CORRECT statement.
A | B | |
Price | $55 | $55 |
Dividend growth rate | 3% | 8% |
Required return | 9% | 14% |
a. | Stock A has a higher dividend yield than Stock B. | |
b. | Stock B has a higher dividend yield than Stock A. | |
c. | One year from now, Stock As price is expected to be higher than Stock Bs price. | |
d. | One year from now, Stock Bs price is expected to be higher than Stock As price. | |
e. | Stock A has a higher capital gains yield. |
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