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 return12%
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 the higher expected year-end dividend.
D. Stock Y has a higher capital gains yield.
E. Stock X has a higher dividend yield than Stock Y.
Answer: B
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