Two Constant Growth Stocks Are in Equilibrium,have the Same Price,and

question 43

Multiple Choice

Two constant growth stocks are in equilibrium,have the same price,and have the same required rate of return.Which of the following statements is CORRECT?

• A)The two stocks must have the same dividend per share.
• B)If one stock has a higher dividend yield, it must also have a lower dividend growth rate.
• C)If one stock has a higher dividend yield, it must also have a higher dividend growth rate.
• D)The two stocks must have the same dividend growth rate.
• E)The two stocks must have the same dividend yield.

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Definitions:

Marginal Time

The additional time required to produce one extra unit of output or complete an additional activity.

Legoland

A theme park chain inspired by the Lego brand, featuring rides, shows, and models made of millions of Lego bricks.

Efficient Market

A market in which all available information is fully and immediately reflected in stock prices, making it impossible to achieve consistently higher returns.

Profit Opportunities

Situations where businesses can earn additional profits due to market conditions, innovations, or identifying unmet needs.