Which of the Following Statements Is CORRECT,assuming Stocks Are in Equilibrium

question 74

Multiple Choice

Which of the following statements is CORRECT,assuming stocks are in equilibrium?

• A)The dividend yield on a constant growth stock must equal its expected total return minus its expected capital gains yield.
• B)Assume that the required return on a given stock is 13%. If the stock's dividend is growing at a constant rate of 5%, its expected dividend yield is 5% as well.
• C)A stock's dividend yield can never exceed its expected growth rate.
• D)A required condition for one to use the constant growth model is that the stock's expected growth rate exceeds its required rate of return.
• E)Other things held constant, the higher a company's beta coefficient, the lower its required rate of return.

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Definitions:

Binomial Distribution

A probability distribution that summarizes the likelihood of a variable to take one of two independent values under a given set of parameters.

Probability Of Success

The likelihood that a specified event or outcome will occur, often utilized in the context of trials or experiments.

Variance

A measure of the dispersion, indicating how far individual numbers in a set are from the mean.

Increase

A rise or growth in quantity, size, number, value, or some other measure.