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# Chapter 9 - Chapter 9 1 Stock X has the following data...

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Chapter 9 1. Stock X has the following data. Assuming the stock market is efficient and the stock is in equilibrium, which of the following statements is CORRECT? Expected dividend, D 1 \$3.00 Current Price, P 0 \$50 Expected constant growth rate 6.0% a. The stock’s required return is 10%. b. The stock’s expected dividend yield and growth rate are equal. c. The stock’s expected dividend yield is 5%. d. The stock’s expected capital gains yield is 5%. e. The stock’s expected price 10 years from now is \$100.00. b The correct answer choice is b. One could quickly calculate the dividend yield and see that it equals the growth rate, but here are some numbers that provide more information. D 1 \$3.00 D 1 /P 0 6.0% P 0 \$50.00 r X 12.0% g 6.0% 2. Which of the following statements is NOT CORRECT?

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