Question: Stocks A & B have the following data. The market risk premium is 6.0 percent and the risk-free rate is 6.4 percent. Suppose the stock market is efficient and the stocks are in equilibrium, which of the given statements is CORRECT?
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A
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B
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Beta
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1.10
|
0.90
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|
Constant growth rate
|
7.00%
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7.00%
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[A] Stock B's dividend yield equals its expected dividend growth rate.
[B] Stock B must have the higher required return.
[C] Stock B could have the higher expected return.
[D] Stock A must have a higher stock price than Stock B.
[E] Stock A must have a higher dividend yield than Stock B.