Stocks a and B Have the Same Price and Are

question 31

Multiple Choice

Stocks A and B have the same price and are in equilibrium, but Stock A has the higher required rate of return. Which of the following statements is CORRECT?

• A) stock b must have a higher dividend yield than stock a.
• B) stock a must have a higher dividend yield than stock b.
• C) if stock a has a higher dividend yield than stock b, its expected capital gains yield must be lower than stock b's.
• D) stock a must have both a higher dividend yield and a higher capital gains yield than stock b.
• E) if stock a has a lower dividend yield than stock b, its expected capital gains yield must be higher than stock b's.

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