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?
$\begin{array} { l c c }
& X & Y \
\text { Price } & \$ 25 & \$ 25 \
\text { Expected dividend yield } & 5 \% & 3 \% \
\text { Required return } & 12 \% & 10 \%
\end{array}$
A) stock x pays a higher dividend per share than stock y.
B) one year from now, stock x should have the higher price.
C) stock y has a lower expected growth rate than stock x.
D) stock y has the higher expected capital gains yield.
E) stock y pays a higher dividend per share than stock x.

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?
 $\begin{array} { l c c } 
 &  X  & Y \
\text { Price } & \$ 25 & \$ 25 \
\text { Expected dividend yield } & 5 \% & 3 \% \
\text { Required return } & 12 \% & 10 \%
\end{array}$
A) stock x pays a higher dividend per share than stock y.
B) one year from now, stock x should have the higher price.
C) stock y has a lower expected growth rate than stock x.
D) stock y has the higher expected capital gains yield.
E) stock y pays a higher dividend per share than stock x.

Quizplus · Accepted Answer

Divdend $=$ Yield $\times$ Price $\quad \mathbf { X }$ dividend $= \$ 1.25$  $ \quad $$ \quad $$Y$ dividend $= \$ 0.75$ 
Stock X has a dividend yield of 5% versus a yield of 3% for Y. Since they both have the same stock price, X must pay a higher dividend.

Stocks X and Y Have the Following Data A) Stock X Pays a Higher Dividend Per Share Than