The risk-free rate is 7% The market risk premium (Rm-Rf) is 8% The following information is availabl

[answerhappygod]

The risk-free rate is
7%






The market risk premium (Rm-Rf) is
8%






The following information is available on stocks A
and B:








Stock A
Stock B






Beta
1.20
0.80





Expected
dividend
next year
$1.00
$1.75





Growth
rate (g)
7.00%
4.00%





Current
Price (p0)
$20.00
$35.00













a. Would you recommend purchasing or selling the
stocks? Explain




b. At what prices will you change your
recommendation from buy or sell to "hold?"