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Stock A has a beta of 1.1 and Stock B has a beta of 0.9. The market risk premium is 6%, and the risk-free rate
Stock A has a beta of 1.1 and Stock B has a beta of 0.9. The market risk premium is 6%, and the risk-free rate is 6.3%. Both stocks have a constant dividend growth rate of 7% a year. If the market is in equilibrium, which of the following statements is CORRECT?
Stock A must have a higher dividend yield than Stock B. | ||
Stock A must have a higher stock price than Stock B. | ||
Stock B's dividend yield equals its expected dividend growth rate. | ||
Stock B must have the higher required return. | ||
Stock B could have the higher expected return. |
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