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Ahmed has to take a decision to invest in either STC Stock or Zain Stock. For the...

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Accounting

Ahmed has to take a decision to invest in either STC Stock orZain Stock.
For the STC Stock, The dividend distributed this year is 2 SRand it will grow at a constant rate (5%) and will continue for aninfinite period.
For Zain Stock, the dividend always stays the same, 3 SR forevery year.
The relative risk with the market for each stock (Beta) isgiven in the following table:

Beta

STC Stock

0.75

Zain Stock

1.25

The market price for STC stock is 20 SR and for Zain stock is26 SR.
As an investment analyst, which stock can you advice Ahmed tobuy.
Note: The risk-free rate is 10 % and the market return is 14%.

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