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? (Hint: Use the SML equation to calculate each stocks required rate of return)
| a. | Stock A must have a higher stock price than Stock B. | |
| b. | Stock A must have a higher dividend yield than Stock B. | |
| c. | Stock Bs dividend yield equals its expected dividend growth rate. | |
| d. | Stock B must have the higher required return. | |
| e. | Stock B could have the higher expected return | |