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Bas_tet [7]
3 years ago
8

Two constant growth stocks are in equilibrium, have the same price, and have the same required rate of return. Which of the foll

owing statements is CORRECT?a. The two stocks must have the same dividend per share.b. If one stock has a higher dividend yield, it must also have a lower dividend growth rate.c. The two stocks must have the same dividend yield.d. The two stocks must have the same dividend growth rate.e. If one stock has a higher dividend yield, it must also have a higher dividend growth rate.
Business
1 answer:
Assoli18 [71]3 years ago
7 0

Answer:

B: If one stock has a higher dividend yield, it must also have a lower dividend growth rate

Explanation:

A constant growth stock is valued using the formula:

P0 = \frac{D1}{ke-g}

from this formula,  holding other things constant, a higher D1 value would decrease P0, whilst a lower g value would have an effect of lowering P0.

For the two stocks to be in equilibrium, since we are not specifically  told that the two stocks have the same growth rate [ the question simply says the growth rate is constant...meaning it is not expected to change], it thus follows that if one one stock has a higher dividend value ( which would  increase the price if all other variables are not changed), it must also have a lower dividend growth rate, which would have the opposing effect, thus keeping the two stocks in equilibrium.

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Answer: B

Explanation:

Price ceiling is the highest authorized price that could be charged by sellers for a good.

Prices received by sellers will be reduced if government would bring down authorized price in the market.

5 0
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The consumer price index is __
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Answer:

The consumer price index is a systematic calculation used to estimate price increases in a basket of goods and services that are indicative of consumption expenditure in the economy.

Explanation:

The Consumer Price Index refers to a metric used to determine the weighted average price of a set of consumer goods and services, such as food, transportation, and healthcare.  CPI is accountable for monitoring the change in retail prices of fundamental and everyday goods and services purchased by households across the world. Changes in the CPI are required to measure increases in the price of living. The CPI is one of the most commonly used indicators for the detection of inflation or deflation cycles.

7 0
3 years ago
Other things the same, a decrease in the price level makes consumers feela.more wealthy, so the quantity of goods and services d
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Answer:

<h2>The answer in this case would be option a. or feel more wealthy, so the quantity of goods and services demanded rises. </h2>

Explanation:

  • As a common consumer psychology,as the price of any good or service decreases,any rational consumer or buyer feels more wealthy compared to before as the purchasing power of the consumers or buyers pertaining to that particular good or services has increased,everything else held constant.
  • Purchasing power of any good or service is generally reflected by the purchasing or buying capacity of that good or service with the amount of money that a consumer or buyer has at his or her disposal.
  • As the price of any good or service decreases,it becomes cheaper to the consumer,again everything else considering constant.In other words,it increases the purchasing power or capacity of the consumers or buyers.Therefore,the typical consumer or buyer will prefer or demand more of that particular good or service thereby,increasing its quantity demanded due to a price reduction.
3 0
3 years ago
Many politicians have degrees in business or law. true or false?
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The answer is mostly True.

4 0
3 years ago
A Treasury bond due in one year has a yield of 5.7%; a Treasury bond due in 5 years has a yield of 6.2%. A bond issued by Ford d
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Answer:

d. 0.8% and 1.3%.

Explanation:

The default risk premiums on the bonds issued by Shell = 6.5% - 5.7% = 0.8%

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Hence, the default risk premium issued by Shell and Ford respectively are 0.8% and 1.3%

7 0
3 years ago
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