Stock X has a required return of 10% while Stock Y has a required return of 12%.Which of the following statements is
CORRECT?
Answer The stocks must sell for the same price. If the market is in equilibrium and if Stock Y has thelowerexpected dividend
yield then it must have thehigherexpected growth rate. If Stock X and Stock Y have the same current dividend and the same expected dividend
growth rate then Stock Y must sell for a higher price. If Stock Y and Stock X have the same dividend yield then Stock Y must have a lower
expected capital gains yield than Stock X. Stock Y must have a higher dividend yield than Stock X.