Homework answers / question archive /  You are considering two stocks

 You are considering two stocks

Business

Share With

 You are considering two stocks. Both pay a dividend of $1, but the beta coefficient of A is 1.5, while the beta coefficient of B is 0.7. Your required return is k=8%+(15%-8%)B a) What is the required return for each stock?  b) If A is selling for $10 a share, is it a good buy if you expect earnings and dividends to grow at 5 percent? c) The earnings and dividends of B are expected to grow annually at 10 percent. Would you buy the stock for $30? d) If the earnings and dividends of A were expected to grow annually at 10 percent, would it be a good buy at $30?