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.

Recognize and analyze syllogistic steps in an argument.

Determine the validity of arguments based on their structure and logical steps.

Differentiate between explicit and implicit propositions within an argument.

Understand the principles of disjunctive and hypothetical propositions.

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Definitions:

Markowitz Model

A portfolio optimization theory that demonstrates how to achieve the best portfolio allocation to maximize return for a given level of risk through diversification.

Systematic Risk

The risk inherent to the entire market or entire market segment, which cannot be eliminated through diversification.

Index Model

A model that describes the relationship between the returns of a stock and the returns of a market index.