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?
X Y
Price $30 $30
Expected growth (constant) 6% 4%
Required return 12% 10%
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.

Answer 1

Answer:

B. One year from now, Stock X's price is expected to be higher than Stock Y's price.

Explanation:

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