Stocks X and Y have the following data. Assuming the stock market is efficient a

Question

1. 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 $25 $25 Expected dividend yield 5% 3% Required return 12% 10% Answer Stock Y pays a higher dividend per share than Stock X. Stock X pays a higher dividend per share than Stock Y. One year from now, Stock X should have the higher price. Stock Y has a lower expected growth rate than Stock X. Stock Y has the higher expected capital gains yield.

1. 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 $25 $25 Expected dividend yield 5% 3% Required return 12% 10% Answer Stock Y pays a higher dividend per share than Stock X. Stock X pays a higher dividend per share than Stock Y. One year from now, Stock X should have the higher price. Stock Y has a lower expected growth rate than Stock X. Stock Y has the higher expected capital gains yield.

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 $25 $25 Expected dividend yield 5% 3% Required return 12% 10% Answer Stock Y pays a higher dividend per share than Stock X. Stock X pays a higher dividend per share than Stock Y. One year from now, Stock X should have the higher price. Stock Y has a lower expected growth rate than Stock X. Stock Y has the higher expected capital gains yield. 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 $25 $25 Expected dividend yield 5% 3% Required return 12% 10% 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 $25 $25 Expected dividend yield 5% 3% Required return 12% 10% X Y $25 $25 5% 3% 12% 10% Stock Y pays a higher dividend per share than Stock X. Stock X pays a higher dividend per share than Stock Y. One year from now, Stock X should have the higher price. Stock Y has a lower expected growth rate than Stock X. Stock Y has the higher expected capital gains yield. X Y Price $25 $25 Expected dividend yield 5% 3% Required return 12% 10% 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?

Explanation / Answer

Stock X: dividend per share = 5%*25 = 1.25

Stock Y: dividend per share = 3%*25 = 0.75

So the answer is Stock X pays a higher dividend per share than Stock Y.

FYI: growth rates can be calculated by: required return - dividend yield. This is equal to 7% for both stocks X and Y.

So the answer is Stock X pays a higher dividend per share than Stock Y.

Hope this helped ! Let me know in case of any queries.

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