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?

Select one:
A. The expected return on the stock is 5 percent a year.
B. The stock’s dividend yield is 5 percent.
C. The stock’s price one year from now is expected to be 5 percent higher.
D. Statements a and c are correct. e. All of the statements above are correct.

Answer 1

Option C

Step-by-step explanation:

the correct answer is Option C

when the stock's dividend is expected to grow at a constant rate of 5 percent per year then the price of the stock expected to be higher by 5% over the span of one year.

hence, the only option which is correct is option C in which the expected growth is expected to be 5 % after one year.