Stocks A and B have the following data. Assuming the stock market is efficient and the stocks are in equilibrium, which of the following statements is CORRECT?
A) The two stocks should have the same expected dividend.
B) The two stocks could not be in equilibrium with the numbers given in the question.
C) A's expected dividend is $0.50.
D) B's expected dividend is $0.75.
E) A's expected dividend is $0.75 and B's expected dividend is $1.20.

Question

Quizplus · Accepted Answer

In an efficient market, stocks in equilibrium should have expected dividends that reflect their risk and return profiles. The given expected dividends for A and B are consistent with this principle.

Stocks a and B Have the Following Data