Stocks a and B Have the Following Data $\text {\underline{ A} }$

question 43

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?                                               $\text {\underline{ A} }$       $\text {\underline{ B} }$

$\begin{array}{lcc}\text { Price } & \$ 25 & \$ 40 \\\text { Expected growth } & 7 \% & 9 \% \\\text { Expected return } & 10 \% & 12 \%\end{array}$

• A) The two stocks could not be in equilibrium with the numbers given in the question.
• B) A's expected dividend is $0.50.
• C) B's expected dividend is $0.75.
• D) A's expected dividend is $0.75 and B's expected dividend is $1.20.
• E) The two stocks should have the same expected dividend.

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Definitions:

Experimental Method

A research method in which variables are manipulated and the effects are observed and measured.

Connectionist Models

Computational models in cognitive science that simulate the neural connections in the brain, emphasizing parallel processing of information.

Central Processor

A term relating to the central executive in Baddeley and Hitch’s model of working memory, involved in reasoning, decision making, and updating and manipulating the contents of working memory.

Evolutionary Psychologists

Specialists in a field that applies evolutionary theory to understand the human mind and behavior, focusing on how evolutionary principles explain psychological traits.