A stock’s dividend is expected to grow at a constant rate of 5 percent a year. W

ID: 2757482 • Letter: A

Question

A stock’s dividend is expected to grow at a constant rate of 5 percent a year. Which of the following statements is most correct?

The expected return on the stock is 5 percent a year.

The stock’s dividend yield is 5 percent.

The stock’s price one year from now is expected to be 5 percent higher.

All of the statements above are correct.

The expected return on the stock is 5 percent a year.

The stock’s dividend yield is 5 percent.

The stock’s price one year from now is expected to be 5 percent higher.

All of the statements above are correct.

The stock’s price one year from now is expected to be 5 percent higher.

since ke =D1/P0 +g

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