Question
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
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%
a. | Stock A's expected dividend at t = 1 is only half that of Stock B. | |
b. | Since Stock As growth rate is twice that of Stock B, Stock As future dividends will always be twice as high as Stock Bs. | |
c. | The two stocks should not sell at the same price. If their prices are equal, then a disequilibrium must exist. | |
d. | Stock A has a higher dividend yield than Stock B. | |
e. | Currently the two stocks have the same price, but over time Stock B's price will pass that of A. |
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