Tammy Welsh Has Two Investment Options to Choose From

question 97

Essay

Tammy Welsh has two investment options to choose from. The stocks of both ABC Inc. and XYZ Corp. are currently trading at $200. ABC Inc. is paying a dividend of $10, and is expected to trade at $215 in a year's time. XYZ Corp. is paying a higher dividend of $25. However, the price of XYZ's stock is only expected to go up to $203 a year from now. Experts are estimating inflation to be about 2% in a year's time.
A) In which stock should Tammy invest and why?
B) If the expected inflation rate was revised to 2.5%, would it alter Tammy's choice? Explain your answer.

• A) In which stock should Tammy invest and why?
• B) If the expected inflation rate was revised to 2.5%, would it alter Tammy's choice? Explain your answer.

---

Definitions:

Pollen Grains

Microscopic structures produced by the male parts of plants, responsible for carrying male gametes to the female part for fertilization.

Progymnosperms

An extinct group of plants that are considered to be the ancestors of both gymnosperms and angiosperms, showing features typical of both groups.

Megaphylls

Leaves with a highly branched vascular system, characteristic of most modern plants, contrasted with microphylls of some ancient lineages.

Woody Tissue

Plant tissue composed mainly of xylem, providing structural support and conduction of water and nutrients; commonly found in trees and shrubs.