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11. You are given the following information about two computer software firms and the S&P 500 Index: Company A Company B S&P 500 18.00 P/E ratio 30.00 27.00 Expected annual growth rate Dividend yield 0.15 0.18 0.07 0.00 0.01 0.02 a. Compute the growth duration of each company stock relative to the S&P 500. b. Compute the growth duration of Company A relative to Company B. c. Given these growth durations, what determines your investment decision?

11. You are given the following information about two computer software firms and the S&P 500 Index: Company A Company B S&P 500 18.00 P/E ratio 30.00 27.00 Expected annual growth rate Dividend yield 0.15 0.18 0.07 0.00 0.01 0.02 a. Compute the growth duration of each company stock relative to the S&P 500. b. Compute the growth duration of Company A relative to Company B. c. Given these growth durations, what determines your investment decision?

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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11. You are given the following information about two computer software firms and the S&P 500 Index: Company A Company B S&P 500 18.00 P/E ratio 30.00 27.00 Expected annual growth rate Dividend yield 0.15 0.18 0.07 0.00 0.01 0.02 a. Compute the growth duration of each company stock relative to the S&P 500. b. Compute the growth duration of Company A relative to Company B. c. Given these growth durations, what determines your investment decision?
Transcribed Image Text:11. You are given the following information about two computer software firms and the S&P 500 Index: Company A Company B S&P 500 18.00 P/E ratio 30.00 27.00 Expected annual growth rate Dividend yield 0.15 0.18 0.07 0.00 0.01 0.02 a. Compute the growth duration of each company stock relative to the S&P 500. b. Compute the growth duration of Company A relative to Company B. c. Given these growth durations, what determines your investment decision?
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