Stocks A and B have the following data. The market risk premium is 6.0% and the risk-free rate is 6.4%. Assuming the stock market is efficient and the stocks are in equilibrium, which of the following statements is CORRECT?
A) Stock A must have a higher stock price than Stock B.
B) Stock A must have a higher dividend yield than Stock B.
C) Stock B's dividend yield equals its expected dividend growth rate.
D) Stock B must have the higher required return.
E) Stock B could have the higher expected return.

Question

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The Answer of Stocks A and B have the following data. The market risk premium is 6.0% and the risk-free rate is 6.4%. Assuming the stock market is efficient and the stocks are in equilibrium, which of the following statements is CORRECT?
A) Stock A must have a higher stock price than Stock B.
B) Stock A must have a higher dividend yield than Stock B.
C) Stock B's dividend yield equals its expected dividend growth rate.
D) Stock B must have the higher required return.
E) Stock B could have the higher expected return.

Stocks a and B Have the Following Data