An investor is considering purchasing one of the following three stocks. Stock X has a market capitalization of $9 billion, pays a relatively high dividend with little increase in earnings, and has a P/E ratio of 12. Stock Y has a market capitalization of $64 billion but does not currently pay a dividend. Stock Y has a P/E ratio of 40. Stock Z, a housing industry company, has a market capitalization of $797 million and a P/E of 18. a. Classify these stocks according to their market capitalizations. b. Which of the three would you classify as a growth stock? Why? c. Which stock would be most appropriate for an aggressive investor? d. Which stock would be most appropriate for someone seeking a combination of safety and earnings?

Explanation:

Question a

Stock X is a Mid Cap (Middle Capitalisation) stock which refers to companies with Market Capitalisation that is between $2 - $10 billion.

Stock Y is a LARGE CAP stock which refers to companies with Market Capitalisation that is $10 to $200 billion.

Stock Z is a Small Cap stock which refers to companies with Market Capitalisation of $300 million - $2 billion.

Question b.

A growth stock is usually ascribed to a company that does not pay dividends or pays very little dividends as profits are reinvested to grow the company.

Stock Y does not pay dividends so is probably a Growth Stock.

Question C.

Aggressive Investors tend to put a large proportion of earnings in companies with little or no history of paying dividends. Stock Y would therefore be most appropriate for an Aggressive Investor.

Question D.

Stock X would be most appropriate for someone seeking a combination of safety and earnings. As a Mid Cap stock they would be less aggressive than Small Cap stock and they also pay out high dividends.

If you need any clarification please feel free to react or comment. This would also help other users as well. Thank you.

the specific actions take by the fed. what the fed was attempting to do by taking these actions. the result of the actions taken by the fed