Stocks A and B have the same price and are in equilibrium, but Stock A has the higher required rate of return. Which of the following statements is CORRECT? a. Stock B must have a higher dividend yield than Stock A. b. Stock A must have a higher dividend yield than Stock B. c. If Stock A has a higher dividend yield than Stock B, its expected capital gains yield must be lower than Stock B's. d. Stock A must have both a higher dividend yield and a higher capital gains yield than Stock B. e. If Stock A has a lower dividend yield than Stock B, its expected capital gains yield must be higher than Stock B's.
Stocks A and B have the same price and are in equilibrium, but Stock A has the higher required rate of return. Which of the following statements is CORRECT? a. Stock B must have a higher dividend yield than Stock A. b. Stock A must have a higher dividend yield than Stock B. c. If Stock A has a higher dividend yield than Stock B, its expected capital gains yield must be lower than Stock B's. d. Stock A must have both a higher dividend yield and a higher capital gains yield than Stock B. e. If Stock A has a lower dividend yield than Stock B, its expected capital gains yield must be higher than Stock B's.
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 12QTD
Related questions
Question
Stocks A and B have the same price and are in equilibrium, but Stock A has the higher required rate of return . Which of the following statements is CORRECT?
a. Stock B must have a higher dividend yield than Stock A.
b. Stock A must have a higher dividend yield than Stock B.
c. If Stock A has a higher dividend yield than Stock B, its expected capital gains yield must be lower than Stock B's.
d. Stock A must have both a higher dividend yield and a higher capital gains yield than Stock B.
e. If Stock A has a lower dividend yield than Stock B, its expected capital gains yield must be higher than Stock B's.
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