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$25
$25
Expected dividend yield5%
3%
Required return12%
10%
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.
Answer: A
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