Stocks A and B have the same price and are in equilibrium,but Stock A has the higher required rate of return.Which of the following statements is CORRECT?
A) If Stock A has a lower dividend yield than Stock B,then its expected capital gains yield must be higher than Stock B's.
B) Stock B must have a higher dividend yield than Stock A.
C) Stock A must have a higher dividend yield than Stock B.
D) If Stock A has a higher dividend yield than Stock B,then its expected capital gains yield must be lower than Stock B's.
E) Stock A must have both a higher dividend yield and a higher capital gains yield than Stock B.

Question

Quizplus · Accepted Answer

Statement a is true,because if the required return for Stock A is higher than that of Stock B,and if the dividend yield for Stock A is lower than Stock B's,the growth rate for Stock A must be higher to offset this.?

Stocks a and B Have the Same Price and Are