Stocks a and B Have the Following Data

question 8

Multiple Choice

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.

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Definitions:

Pre-existing Duty Rule

A legal principle stating that a party's promise to perform a duty that is already owed under a contract does not constitute valid consideration for a new agreement.

Synthetic Fuel Oil

A liquid fuel produced from coal, natural gas, or biomass through chemical processes rather than by natural geological processes.

Legal Terminology

The specialized language used that relates to laws or the legal process, including terms of art, phrases, and concepts.

Sufficiency of Consideration

The legal principle that the value exchanged in a contract must be both legally sufficient and something of value, in order for the contract to be enforceable.