You are offered two stocks. The beta of A is 1.4 while the beta of B is

Question:

You are offered two stocks. The beta of A is 1.4 while the beta of B is 0.8. The growth rates of earnings and dividends are 10 percent and 5 percent, respectively. The dividend yields are 5 percent and 7 percent, respectively.

a) Since A offers higher potential growth, should it be purchased?

b) Since B offers a higher dividend yield, should it be purchased?

c) If the risk-free rate of return were 7 percent and the return on the market is expected to be 14 percent, which of these stocks should be bought?

Stocks
Stocks or shares are generally equity instruments that provide the largest source of raising funds in any public or private listed company's. The instruments are issued on a stock exchange from where a large number of general public who are willing... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...