Amy G.

asked • 02/11/14

offer of two stocks

You are offered two stocks.  The beta of A is 1.4 while the beta of B is 0.8.  The growth rates of earnings and dividends are 10 percent and 5 percent, respectively. 
The dividends yields are 5 percent and 7 percent, respectively.
a. since A offers higher potential growth, should it be purchased?
b. since B offers a higher dividend yield, should it be purchased?
c. If the risk free rate of return were 7 percent and the return on the market is expected to be 14 percent, which of these stocks should be bought?

1 Expert Answer

By:

Jon L. answered • 02/13/14

Tutor
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