Stocks a and B Have the Following Data A) Stock a Must Have a Higher Dividend Yield Than

question 23

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? $$\begin{array} { l c c } & \mathrm { A } & \mathrm { B } \\\text { Beta } & 1.10 & 0.90 \\\text { Constant growth rate } & 7.00 \% & 7.00 \%\end{array}$$

• A) Stock A must have a higher dividend yield than Stock B.
• B) Stock B's dividend yield equals its expected dividend growth rate.
• C) Stock B must have the higher required return.
• D) Stock B could have the higher expected return.
• E) Stock A must have a higher stock price than Stock B.

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