Problem 11-07

please answer for question b (stock a or stock b)

c (should or should not)

d (should or should not)

e (Stock a, stock b, neither stocks, or both stocks)

"? Cengage Digital Learning MindTap - Cengage Lea X Course Hero + X O A https:/g.cengage.com/staticb/ui/evo/index.html?deploymentld=59440722375013485425961657319&eISBN=9781337403047&nbid=1826168&snapshotkc [!!] > CENGAGE |MINDTAP Q Search this course ? Ch 11: End-of-Chapter Problems - Stock Valuation X eBook Problem 11-07 E The security market line is estimated to be A-Z k=8% + (10.9% - 8%)B. 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 7.3 percent. The beta of B is 2.1. The firm offers a dividend yield during the year of 4.1 percent and a growth rate of 6.7 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- v 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. O Type here to search e 10:29 PM 9/13/2020