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.

Evaluate the support and resources provided by franchisors to franchisees, including marketing and financial assistance.

Recognize the importance of professional advice (legal, financial) when entering into franchise agreements.

Understand the historical development of franchising and its impact on the economy.

Recognize the significance of exclusive territories and how they affect franchise operations.

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Definitions:

Investment

Allocation of resources, such as capital or time, in the expectation of generating an income or profit.

Line-By-Line Method

The line-by-line method is a technique used in consolidating the financial statements of a parent company and its subsidiaries, where each item of the subsidiary is added line by line to those of the parent.

Technical Services

Services that require specialized skills or knowledge, often in the fields of engineering, IT, or other technical disciplines.

Fair Value

An accounting term that refers to the estimated price at which an asset or liability could be exchanged in an arm's length transaction between knowledgeable, willing parties.