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? ABPrice$25 $40 Expected growth7% 9% Expected return10% 12% ?
A. The two stocks should have the same expected dividend.
B. The two stocks could not be in equilibrium with the numbers given in the question.
C. A's expected dividend is $0.50.
D. B's expected dividend is $0.75.
E. A's expected dividend is $0.75 and B's expected dividend is $1.20.
Answer: E
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