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    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?

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    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 (con

    Answer to: Stocks X and Y have the following data: Assuming the stock market is efficient and the stocks are in equilibrium, which of the following...

    Dividend yield

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

    Stocks X and Y have the following data: Assuming the stock market is efficient and the stocks... 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 a higher expected year-end dividend.

    D. Stock X has a higher dividend yield than Stock Y.

    E. Stock Y has a higher capital gains yield.

    Capital Gains Yield:

    The capital gains yield refers to the percentage increase in the price of the investment over a period of time. It can be estimated dividing the increase in price by the original cost of the investment. The dividends are irrelevant while considering the capital gains yield.

    Answer and Explanation:

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    C. Stock X has a higher expected year-end dividend.

    The stocks are in equilibrium and markets are efficient so as per the given...

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    What Is Dividend Yield? - Definition & Calculation

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    Chapter 2 / Lesson 10

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    What is Dividend Yield and its formula? What does the Dividend Yield indicate? Understand the relationship between dividends and market price.

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    Finance Chapter 9 Flashcards

    Study with Quizlet and memorize flashcards terms like Stocks A and B have the same price and are in equilibrium, but Stock A has the higher required rate of return. Which of the following statements is CORRECT, 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%, Stocks A and B have the following data. The market risk premium is 6.0% and the risk-free rate is 6.4%. Assuming the stock market is efficient and the stocks are in equilibrium, which of the following statements is CORRECT? A B Beta 1.10 0.90 Constant growth rate and more.

    Finance Chapter 9

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    Stocks A and B have the same price and are in equilibrium, but Stock A has the higher required rate of return. Which of the following statements is CORRECT

    Click card to see definition 👆

    If Stock A has a lower dividend yield than Stock B, its expected capital gains yield must be higher than Stock B's

    Statement a is true, because if the required return for Stock A is higher than that of Stock B, and if the dividend yield for Stock A is lower than Stock B's, the growth rate for Stock A must be higher to offset this.

    Click again to see term 👆

    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%

    Click card to see definition 👆

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

    The correct answer is statement c. Both prices are currently the same, but X's price should grow at 6% vs. 4% for Y, so X's price should be higher a year from now.

    Click again to see term 👆

    1/8 Created by Kyle_England

    Terms in this set (8)

    Stocks A and B have the same price and are in equilibrium, but Stock A has the higher required rate of return. Which of the following statements is CORRECT

    If Stock A has a lower dividend yield than Stock B, its expected capital gains yield must be higher than Stock B's

    Statement a is true, because if the required return for Stock A is higher than that of Stock B, and if the dividend yield for Stock A is lower than Stock B's, the growth rate for Stock A must be higher to offset this.

    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%

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

    The correct answer is statement c. Both prices are currently the same, but X's price should grow at 6% vs. 4% for Y, so X's price should be higher a year from now.

    Stocks A and B have the following data. The market risk premium is 6.0% and the risk-free rate is 6.4%. Assuming the stock market is efficient and the stocks are in equilibrium, which of the following statements is CORRECT?

    A B Beta 1.10 0.90

    Constant growth rate

    Stock A must have a higher dividend yield than Stock B.

    Statement b is true, because Stock A has a higher required return but the stocks have the same growth rate, so Stock A must have the higher dividend yield. Here are some calculations to demonstrate the point.

    A stock just paid a dividend of D0 = $1.50. The required rate of return is rs = 10.1%, and the constant growth rate is g = 4.0%. What is the current stock price?

    ...

    The constant growth DCF model used to evaluate the prices of common stocks is conceptually similar to the model used to find the price of perpetual preferred stock or other perpetuities.

    t

    The corporate valuation model can be used only when a company doesn't pay dividends.

    f

    Projected free cash flows should be discounted at the firm's weighted average cost of capital to find the firm's total corporate value.

    t

    From an investor's perspective, a firm's preferred stock is generally considered to be less risky than its common stock but more risky than its bonds. However, from a corporate issuer's standpoint, these risk relationships are reversed: bonds are the most risky for the firm, preferred is next, and common is least risky.

    t

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    Answered: and B have the following data. Assuming…

    Solution for and B have the following data. Assuming the stock market is efficient and the stocks are in equilibrium, which of the following statements is…

    Question

    Stocks A and B have the following data. Assuming the stock market is efficient and the stocks are in equilibrium, which of the following statements is CORRECT?

    A B Price $25 $25

    Expected growth (constant)

    10% 5% Required return 15% 15% ​ Select one: a.

    The two stocks should not sell at the same price. If their prices are equal, then a disequilibrium must exist.

    b.

    Stock A has a higher dividend yield than Stock B.

    c.

    Stock A's expected dividend at t = 1 is only half that of Stock B.

    d.

    Currently the two stocks have the same price, but over time Stock B's price will pass that of A.

    e.

    Since Stock A's growth rate is twice that of Stock B, Stock A's future dividends will always be twice as high as Stock B's.

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