Stock A has a beta of 1.1 and Stock B's beta is 0.9.The market risk premium is 6%,and the risk-free rate is 6.3%.Both stocks have a constant dividend growth rate of 7%.If the market is 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 must have the higher required return.
D) Stock B could have the higher expected return.
Correct Answer:
Verified
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