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% and 5%, respectively. The dividend yields are 5% and 7%, 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% and the return on the market is expected to be 14%, which of these stocks should be bought?