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Stock a Has a Required Return of 10% and a Price

Question 17

Multiple Choice

Stock A has a required return of 10% and a price of $25,and its dividend is expected to grow at a constant rate of 7% per year.Stock B has a required return of 12% and a price of $40,and its dividend is expected to grow at a constant rate of 9% per year.Which of the following statements is correct?


A) If the stock market were efficient, these two stocks would have the same price.
B) The two stocks have the same dividend yield.
C) If the stock market were efficient, these two stocks would have the same expected return.
D) The two stocks have the same expected capital gains yield.

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