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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. If Stock A has a lower dividend yield than Stock B, its expected capital gains yield must be higher than Stock B's. b. Stock A must have a higher dividend yield than Stock B. c. Stock A must have both a higher dividend yield and a higher capital gains yield than Stock B. d. If Stock A has a higher dividend yield than Stock B, its expected capital gains yield must be lower than Stock B's. e. Stock B must have a higher dividend yield than Stock A.

Respuesta :

Answer:

A

Explanation:

If stock A has a lower dividend yield than stock B, its expected capital gains yield must be higher than stock B's

This i true because's required return for stock A is higher than that of stock B and if the dividend yield is lower than that of B then the growth rate of A must be be higher to offset this difference since the formula for calculating stock price using dividend model uses required rate of return to discount the dividends.

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