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

question 83

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? $\begin{array}{lrr}& \underline{\text { A }} &\underline{\text {B}}\\ \text { Price } & \$ 25 & \$ 25\\\text { Expected growth } & 10 \% & 5 \% \\\text { Expected return } & 15\% & 15 \%\end{array}$

• 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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