Stocks a and B Have the Following Data ?
A) Stock A's Expected Dividend at T = 1

question 29

Multiple Choice

Stocks A and B have the following data.Assuming the stock market is efficient and the stocks are in equilibrium,which of the following statements is CORRECT? $$\begin{array} { l r r } & \text { A } & \text { B } \\\text { Price } & \$ 25 & \$ 25 \\\text { Expected growth (constant) } & 10 \% & 5 \% \\\text { Required return } & 15 \% & 15 \%\end{array}$$
?

• A) Stock A's expected dividend at t = 1 is only half that of Stock B.
• B) Stock A has a higher dividend yield than Stock B.
• C) Currently the two stocks have the same price,but over time Stock B's price will pass that of A.
• D) Since Stock A's growth rate is twice that of Stock B,Stock A's future dividends will always be twice as high as Stock B's.
• E) The two stocks should not sell at the same price.If their prices are equal,then a disequilibrium must exist.

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Definitions:

Dominant Response

The reaction or behavior that is most likely to be displayed by an individual in a given situation under pressure or stress.

Aggregate

A collection or sum of many individual parts, units, or individuals considered as a whole in statistics or research.

Collective

Refers to actions or situations that involve or are done by a group of people working together.

Audience Effect

The influence that the presence of others has on an individual's performance or behavior.