Stocks a and B Have the Following Data

question 58

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? ​

• 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:

Marginal Revenue Product

The boost in revenue achieved by adding one more unit of a factor involved in production.

Marginal Product

The additional output that results from using one more unit of a particular input, keeping other inputs constant.

Variable Input

Any resource used in production whose quantity can be changed in the short term to increase or decrease output.

Marginal Revenue Product Curve

A graphical representation showing how the additional revenue generated by employing one more unit of a resource varies with the quantity of the resource employed.