Stocks a and B Have the Following Data

question 2

Multiple Choice

Stocks A and B have the following data.Assuming the stock market is efficient and the stocks are in equilibrium,​

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

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Definitions:

Reinforcement

In behavioral psychology, a process by which a behavior becomes more likely to occur because it is followed by a reward or the removal of an unpleasant stimulus.

Spontaneous Recovery

The reappearance of a previously extinguished response after a period without exposure to the conditioned stimulus.

Conditioned Stimulus

An initially neutral trigger that, after being paired with an unconditioned stimulus, in time invokes a conditioned response.

Unconditioned Stimulus

A stimulus that inherently and instinctively induces a reaction without the need for previous learning.