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. Problems Most of these problems are straightforward and only moderately difficult. However, a few of the later ones are relatively difficult and should be used primarily on take-home exams for students with some experience with Excel. Problems with * in the topic line are nonalgorithmic.

Question

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. Problems Most of these problems are straightforward and only moderately difficult. However, a few of the later ones are relatively difficult and should be used primarily on take-home exams for students with some experience with Excel. Problems with * in the topic line are nonalgorithmic.

Quizplus · Accepted Answer

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. Problems Most of these problems are straightforward and only moderately difficult. However, a few of the later ones are relatively difficult and should be used primarily on take-home exams for students with some experience with Excel. Problems with * in the topic line are nonalgorithmic.

Stocks a and B Have the Following Data