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             Beta                                            1.20                    1.40          Constant growth rate              7.00%                 7.00%     Group of answer choices Stock B's dividend yield equals its expected dividend growth rate. Stock A could have a higher expected return than Stock B. Stock B must have a higher dividend yield than Stock B. Stock A must have a higher required return than Stock B.. Stock A must have a higher stock price than Stock B

Corporate Fin Focused Approach
5th Edition
ISBN:9781285660516
Author:EHRHARDT
Publisher:EHRHARDT
Chapter6: Risk And Return
Section: Chapter Questions
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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   
         Beta                                            1.20                    1.40
         Constant growth rate              7.00%                 7.00%    

Group of answer choices
Stock B's dividend yield equals its expected dividend growth rate.
Stock A could have a higher expected return than Stock B.
Stock B must have a higher dividend yield than Stock B.
Stock A must have a higher required return than Stock B..
Stock A must have a higher stock price than Stock B
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