eBook Problem 11-07 The security market line is estimated to be -8(11.7%-8%). You are considering two stocks. The bota of A1 1.4. The firm offers a dividend yield during the year of 5 percent and a growth rate of 5 percent. The beta of k 1.1. The firm offers a dividend yield during the year of 5.5 percent and a growth rate of 4.2 percent. a. What is the required return for each security? Round your answers to two dedmal places 96 Stock A: Stock B: b. Why are the required rates of return different? The difference in the required rates of return is the result of select being riskier. c. Since A offers higher potential growth, should it be purchased? Stock A Select be purchased. d. Since B offers higher dividend yield, should it be purchased? Stock B -Select be purchased Which stock() should be purchased? should be purchased Problem 11-07 The security market line is estimated to be k-8% + (11.7% - 8%). You are considering two stocks. The beta of A is 1.4. The firm offers a dividend yield during the year of 5 percent and a The firm offers a dividend yield during the year of 5.5 percent and a growth rate of 4.2 percent. a. What is the required return for each security? Round your answers to two decimal places. Stock A: % Stock B: % b. Why are the required rates of return different? The difference in the required rates of return is the result of select being riskier. c. Since A offers higher potential growth, should it be purch stock stock B Stock A -Select- be purchased. d. Since B offers higher dividend yield, should it be purchased? Stock B -Select- be purchased. e. Which stock(s) should be purchased? -Select- should be purchased. k-8% + (11.7% -8%). You are considering two stocks. The beta of A is 1.4. The firm offers a dividend yield during the year The firm offers a dividend yield during the year of 5.5 percent and a growth rate of 4.2 percent. a. What is the required return for each security? Round your answers to two decimal places. Stock A: % Stock B: % b. Why are the required rates of retur different? The difference in the required rates of return is the result of -Select- being riskier. c. Since A offers higher potential growth, should it be purchased? Stock A Select be purchased. -Select-los her dividend yield, should it be purchased? should not Stock B -Select- y be purchased. d. Since should e. Which stock(s) should be purchased? -Select- should be purchased. tribw Luecmai pia Stock A: % Stock B: % b. Why are the required rates of return different? The difference in the required rates of return is the result of Select- being riskier. C. Since A offers higher potential growth, should it be purchased? Stock A -Select- be purchased. d. Since B offers higher dividend yield, should it be purchased? Stock B -Select- be purchased. -Select- e. Whic should ould be purchased? should not -Select- should be purchased. Stock B: % b. Why are the required rates of return different? The difference in the required rates of return is the result of -Select- v bei c. Since A offers higher potential growth, should it be purchased? Stock A-Select- be purchased. d. Since B offers higher dividend yield, should it be purchased? Stock B -Select- v be purchased. e. Which stock(s) should be purchased? -Select- V should be purchased. -Select- Stock A Stock B Neither of stocks Both stocks
