Ima is considering a purchase of Wallnut Company stock. Using the same scenarios and probabilities as in

Question:

Ima is considering a purchase of Wallnut Company stock. Using the same scenarios and probabilities as in problem 10, she estimates Wallnut’s return is -5% in a recession, 20 percent in constant growth, and 10% in inflation.

a) What is Ima’s expected return forecast for Wallnut stock?

b) What is the standard deviation of the forecast?

c) If Wallnut’s current price is $20 a share and is expected to pay a dividend of $0.80 a share next year, what price does Ima expect Wallnut to sell for in one year?

Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their... Expected Return
The expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR). It is calculated by multiplying potential outcomes by the chances of them occurring and then totaling these...