Stocks a and B Have the Following Data

question 16

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?

• 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.

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Definitions:

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A pattern characterized by high levels of competitiveness, self-driven ambition, impatience, and a sense of urgency, often linked to stress and health issues.

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Communication Competency

The ability to effectively convey, receive, and interpret messages and information through verbal, nonverbal, and written expressions.