An older article in The Wall Street Journal included the following paragraph: $$Based on the S&P $500$s current multiple of $16\mathrm{.}8$ times earnings over the past $12$ months, according to Thomson Reuters, investors are anticipating modest inflation. Since $1950,$ in periods when inflation ran between $2\%$ and $4\%[$as it has through much of this decade$],$ stocks traded at an average price$/$earnings ratio of $17\mathrm{.}4,$ according to Strategas Research Partners. But in a $4\%$ to $6\%$ inflation environment, the average P$/$E ratio dropped to $14\mathrm{.}7.$

$1.$ Use the data to calculate the nominal Rate of Return based on the Earnings Yield model for time periods when inflation ranged from $2\%$ to $4\%.$ Use the mid$-$point of the inflation range to derive the numbers. Rate of Return:

$2.$ Use the data to calculate the nominal Rate of Return based on the Earnings Yield model for time periods when inflation ranged from $4\%$ to $6\%.$ Use the mid$-$point of the inflation range to derive the numbers. Rate of Return:

$3.$ Stellar Aeronautics, Inc. is trading at a trailing PE of $13\mathrm{.}6.$ Analysts forecast Stellar$$s dividends will continue to grow at its recent rate of $4\mathrm{.}00\%$ annually into the indefinite future. The dividend paid in $2023$ is forecast to be $$0\mathrm{.}60$ per share while EPS were $$1\mathrm{.}50.$ You select a rate of return of $7\mathrm{.}25\%.$ Stellar$$s stock is:

a$.$ Undervalued. b$.$ Overvalued. c$.$ Fairly valued. d$.$ Cannot be determined from the information given. e$.$ None of the above answers is correct.