An investor is considering purchasing one of the following three stocks. Stock X has a market capitalization of

$8

billion, pays a relatively high dividend with little increase in earnings, and has a P/E ratio of

11.

Stock Y has a market capitalization of

$61

billion but does not currently pay a dividend. Stock Y has a P/E ratio of

37.

Stock Z, a housing industry company, has a market capitalization of

$796

million and a P/E of

18.

a. Classify these stocks according to their market capitalizations.

b. Which of the three would you classify as a growth stock? Why?

c. Which stock would be most appropriate for an aggressive investor?

d. Which stock would be most appropriate for someone seeking a combination of safety and earnings?

Question content area bottom

Part 1

a. Stock X is classified as a

small-cap

mid-cap

large-cap

stock.