1. 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?

	A	B
Price	$25	$25
Expected growth (constant)	10%	5%
Required return	15%	15%

Answer

		These two stocks must have the same dividend yield.
		These two stocks should have the same expected return.
		These two stocks must have the same expected capital gains yield.
		These two stocks must have the same expected year-end dividend.
		These two stocks should have the same price.

2. Bonds A and B are 15-year, $1,000 face value bonds. Bond A has a 7% annual coupon, while Bond B has a 9% annual coupon. Both bonds have a yield to maturity of 8%, which is expected to remain constant for the next 15 years. Which of the following statements is CORRECT?

Answer

		One year from now, Bond A's price will be higher than it is today.
		Bond A's current yield is greater than 8%.
		Bond A has a higher price than Bond B today, but one year from now the bonds will have the same price.
		Both bonds have the same price today, and the price of each bond is expected to remain constant until the bonds mature.
		Bond B has a higher price than Bond A today, but one year from now the bonds will have the same price.