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
B
Beta1.10
0.90
Constant growth rate7.00%
7.00%
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.
Answer: A
You might also like to view...
Which of the following organizations is responsible for setting auditing standards followed by public accounting firms in conducting independent audits of financial statements?
a. Financial Accounting Standards Board (FASB) b. Securities and Exchange Commission (SEC) c. Public Company Accounting Oversight Board (PCAOB) d. International Accounting Standards Board (IASB)
Abbel Inc., a manufacturing company, believes that pay is an investment that can generate returns in attracting, retaining, and motivating a high-quality workforce. In this case, which statement is true about Abbel Inc.?
A. It is a customer-friendly firm. B. It gives the least importance to profits. C. It considers its employees as resources. D. It helps employees find higher-paying jobs. E. It tries to keep its labor costs minimal.
The concept of eight basic consumer rights is supported by American law, but not by international organizations such as the United Nations
Indicate whether the statement is true or false
A cost that will not be affected by later decisions is termed a(n):
A) historical cost B) differential cost C) sunk cost D) replacement cost