Questions: Stocks A and B have a required return of 13%. Stock A has a capital gains yield of 8%. Stock B has a capital gains yield of 9%. Which stock has a higher dividend yield?

The answer is b: A.

To determine which stock has a higher dividend yield, we can use the formula for the required return on a stock, which is the sum of the dividend yield and the capital gains yield:

\[ \text{Required Return} = \text{Dividend Yield} + \text{Capital Gains Yield} \]

Given that both stocks A and B have a required return of 13%, we can set up the equations for each stock:

For Stock A: \[ 13\% = \text{Dividend Yield}_A + 8\% \]

For Stock B: \[ 13\% = \text{Dividend Yield}_B + 9\% \]

Now, solve for the dividend yield for each stock:

For Stock A: \[ \text{Dividend Yield}_A = 13\% - 8\% = 5\% \]

For Stock B: \[ \text{Dividend Yield}_B = 13\% - 9\% = 4\% \]

Comparing the two, Stock A has a dividend yield of 5%, while Stock B has a dividend yield of 4%. Therefore, Stock A has a higher dividend yield.

Explanation for each option: a. B - Incorrect. Stock B has a lower dividend yield of 4%. b. A - Correct. Stock A has a higher dividend yield of 5%. c. not enough information - Incorrect. We have enough information to calculate and compare the dividend yields.