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Ima is considering a purchase of Wallnut Company stock. Using the same scenarios and probabilities as in problem 10, she estimates Wallnuts return is -5
Ima is considering a purchase of Wallnut Company stock. Using the same scenarios and probabilities as in problem 10, she estimates Wallnuts return is -5 percent in a recession, 20 percent in constant growth, and 10 percent in inflation.
a. What is Imas expected return forecast for Wallnut stock?
b. What is the standard deviation of the forecast?
c. If Walnuts current price is $20 per share and Wallnut is expected to pay a dividend of $0.80 per share next year, what price does Uma expect Wallnut to sell for in one year?
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