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problem: Stocks A & B have the following data. The market risk premium is 6.0 percent and the risk-free rate is 6.4 percent.  Suppose the stock market is efficient and the stocks are in equilibrium, which of the given statements is CORRECT?

 

A

B

Beta

1.10

0.90

Constant growth rate

7.00%

7.00%

[A]      Stock B's dividend yield equals its expected dividend growth rate.

[B]      Stock B must have the higher required return.

[C]      Stock B could have the higher expected return.

[D]      Stock A must have a higher stock price than Stock B.

[E]      Stock A must have a higher dividend yield than Stock B.

 

Basic Finance, Finance

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