Two stocks each currently pay a dividend of $$1\mathrm{.}10$ per share. It is anticipated that both firms$$ dividends will grow annually at the rate of $4$ percent. Firm A has a beta coefficient of $1\mathrm{.}08$ while the beta coefficient of firm B is $1\mathrm{.}39.$

If U$.$S$.$ Treasury bills currently yield $5\mathrm{.}7$ percent and you expect the market to increase at an annual rate of $8\mathrm{.}8$ percent, what are the valuations of these two stocks using the dividend$-$growth model? Do not round intermediate calculations. Round your answers to two decimal places.

Stock A: $

Stock B: $

Why are your valuations different?

The beta coefficient of

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is higher, which indicates the stock's return is

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volatile.

If stock A$$s price were $$45$ and stock B$$s price were $$58,$ what would you do$?$

Stock A is

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and

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be purchased.

Stock B is

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and

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be purchased.