Stocks a and B Have the Following Data A)Stock a Has a Higher Dividend Yield Than Stock B

question 15

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? $$\begin{array} { l c c } &\text {A}&\text {B}\\\text { Price } & \$ 25 & \$ 25 \\\text { Expected growth (constant) } & 10 \% & 5 \% \\\text { Required return } & 15 \% & 15 \%\end{array}$$

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

---

Definitions:

Hemoglobin Synthesis

The production of hemoglobin, a protein in red blood cells that carries oxygen throughout the body.

Erythrocyte Production

The process by which new red blood cells (erythrocytes) are generated, primarily occurring in the bone marrow, known medically as erythropoiesis.

Minerals

Inorganic substances required by the body in small amounts for a variety of functions, including building strong bones and teeth, and regulating metabolism.

Buffers

Substances that minimize changes in pH by absorbing or releasing hydrogen ions in a solution.