If a stock's dividend is expected to grow at a constant rate of 5% a year,which of the following statements is CORRECT? The stock is in equilibrium.
A)The expected return on the stock is 5% a year.
B)The stock's dividend yield is 5%.
C)The price of the stock is expected to decline in the future.
D)The stock's required return must be equal to or less than 5%.
E)The stock's price one year from now is expected to be 5% above the current price.

Question

Quizplus · Accepted Answer

The stock's price is expected to grow at the same rate as the dividend growth rate, which is 5% per year.

If a Stock's Dividend Is Expected to Grow at a Constant