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

question 57

Multiple Choice

Stocks A and B have the following data.The market risk premium is 6.0% and the risk-free rate is 6.4%.Assuming the stock market is efficient and the stocks are in equilibrium,which of the following statements is CORRECT? $\begin{array}{llcc} \text { } & \underline{ \text {A} }& \underline{ \text {B} } \\ \text { Beta } &1.10&0.90\\ \text {Constant growth rate } &7.00\%&7.00\%\\\end{array}$

• A)Stock A must have a higher dividend yield than Stock B.
• B)Stock B's dividend yield equals its expected dividend growth rate.
• C)Stock B must have the higher required return.
• D)Stock B could have the higher expected return.
• E)Stock A must have a higher stock price than Stock B.

---

Definitions:

Fernando Botero

A Colombian figurative artist and sculptor, known for his signature style featuring exaggerated, voluptuous forms.

Mount St. Helens

An active stratovolcano located in Washington State, USA, known for its major eruption on May 18, 1980.

Abstract Landscape

An artistic representation of landscapes that emphasizes shapes, colors, and forms over realistic depictions, aiming to express emotions and ideas.

La Grande Louvre Pyramide

A large glass and metal pyramid serving as the main entrance to the Louvre Museum in Paris, France, designed by architect I. M. Pei.