Stocks a and B Have the Following Data

question 13

Multiple Choice

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.

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Definitions:

Mucosa

The moist, inner lining of some organs and body cavities, such as the nose, mouth, lungs, and stomach.

Villi

Small fingerlike projections that extend into the lumen of the small intestine, increasing its surface area for absorption.

Medial Margin

The edge or boundary closest to the midline of the body or a body part.

Stomach

A muscular organ in the digestive system that processes food by mixing it with digestive juices and enzymes.