Beta involved problem

eBook Problem 11-07 The security market line is estimated to be k=7% + (9.2% - 7%). You are considering two stocks. The beta of A is 1.8. The firm offers a dividend yield during the year of 3 percent and a growth rate of 6.5 percent. The beta of B is 2.3. The firm offers a dividend yield during the year of 4.3 percent and a growth rate of 5.5 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- v 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. e. Which stock(s) should be purchased? -Select- should be purchased