Answer to Question #24764 in Finance for toni

Question

Two constant growth stocks are in equilibrium, have the same price, and have the same required rate of return. Which of the following statements is CORRECT?



The two stocks must have the same dividend per share.








If one stock has a higher dividend yield, it must also have a lower dividend growth rate.








If one stock has a higher dividend yield, it must also have a higher dividend growth rate.








The two stocks must have the same dividend growth rate.








The two stocks must have the same dividend yield

Answer 1

Two constant growth stocks are in equilibrium, have the same price, and have the same required rate of return.

Right answer is: "The two stocks must have the same dividend", because as the stocks are of constant growth, have the same price, and have the same required rate of return, they have same divident.