Which of the Following Statements Is CORRECT,assuming Stocks Are in Equilibrium

question 74

Multiple Choice

Which of the following statements is CORRECT,assuming stocks are in equilibrium?

• A)The dividend yield on a constant growth stock must equal its expected total return minus its expected capital gains yield.
• B)Assume that the required return on a given stock is 13%. If the stock's dividend is growing at a constant rate of 5%, its expected dividend yield is 5% as well.
• C)A stock's dividend yield can never exceed its expected growth rate.
• D)A required condition for one to use the constant growth model is that the stock's expected growth rate exceeds its required rate of return.
• E)Other things held constant, the higher a company's beta coefficient, the lower its required rate of return.

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Definitions:

U.S. Currency

The money that is legally in use in the United States, consisting mainly of Federal Reserve Notes (dollar bills).

Federal Reserve

The central banking system of the United States, responsible for monetary policy, including regulation of money supply and interest rates.

U.S. Government Securities

Financial instruments issued by the U.S. Treasury or federal government agencies to finance government spending and obligations.

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Parts or elements that make up the total value of assets owned by an individual or organization.