Tammy Welsh Has Two Investment Options to Choose From

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