Which of the following statements is most correct?
A) Assume that the required rate of return on a given stock is 13 percent. If the stock's dividend is growing at a constant rate of 5 percent, its expected dividend yield is 5 percent as well.
B) The dividend yield on a stock is equal to the expected return less the expected capital gain.
C) A stock's dividend yield can never exceed the expected growth rate.
D) All of the answers above are correct.
E) Answers b and c are correct.

Question

Quizplus · Accepted Answer

The dividend yield on a stock is calculated by dividing the expected dividend by the current stock price. It is not necessarily equal to the expected return less the expected capital gain. Choice A is incorrect as the expected dividend yield is not necessarily the same as the expected growth rate. Choice C is incorrect as there is no limit on a stock's dividend yield. Choice D and E are incorrect as only choice B is correct.

Which of the Following Statements Is Most Correct