Which of the Following Statements Is CORRECT,assuming Stocks Are in Equilibrium

question 74

Multiple Choice

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

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

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Definitions:

Magnitude

The size, extent, or importance of something, often used in reference to quantitative measurements or perceived impact.

Social Utility

The overall contribution that an action or policy makes toward the good or welfare of a society.

Latent Defect

A hidden flaw in a product or property that is not easily observable or discoverable at the time of purchase.

Due Care

The effort made by a reasonable party to avoid harm to others or their property, typically by following a standard of conduct that meets legal or ethical expectations.