Stock a Has a Required Return of 10% and a Price

question 9

Multiple Choice

Stock A has a required return of 10% and a price of $25,and its dividend is expected to grow at a constant rate of 7% per year.Stock B has a required return of 12% and a price of $40,and its dividend is expected to grow at a constant rate of 9% per year.Which of the following statements is correct?

• A)If the stock market were efficient, these two stocks would have the same price.
• B)The two stocks have the same dividend yield.
• C)If the stock market were efficient, these two stocks would have the same expected return.
• D)The two stocks have the same expected capital gains yield.

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