Which of the Following Statements Is CORRECT, Assuming Stocks Are

question 76

Multiple Choice

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

• A) 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.
• B) A stock's dividend yield can never exceed its expected growth rate.
• C) 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.
• D) Other things held constant, the higher a company's beta coefficient, the lower its required rate of return.
• E) The dividend yield on a constant growth stock must equal its expected total return minus its expected capital gains yield.

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Definitions:

Sciatica

A condition of pain going down the leg from the lower back, caused by irritation or compression of the sciatic nerve.

Cushion

A soft bag of material used to provide comfort, support, or decoration on furniture.

Maintaining Flexibility

The act of regularly engaging in activities that preserve or enhance the range of motion and elasticity of the muscles and tendons.

Joints

The points at which two bones connect in the body, allowing for movement and flexibility.