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S0.25 .. RISK The common stock of Man Chu Wok, Inc., a restaurant chain will generate the following payoffs to investors next year: (There are

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S0.25 .. RISK The common stock of Man Chu Wok, Inc., a restaurant chain will generate the following payoffs to investors next year: (There are only 4 possible states as defined by the inflation rate) State Probability Dividend Stock Prics inflation is 0% 0.1 $0 $8 Inflation is 2% 0.5 S12 Inflation is 496 0.3 $0.5 $14 Inflation is 6% 0.1 SO.S SIS The current stock price of Man Chu Wok, Inc is $10. Calculate the nominal rate of returns under each of the states. b. Calculate the real rate of returns under each of the states. c. Calculate the expected nominal rate of returns and its standard deviation d. Calculate the expected real rate of retums and its standard deviation e. Suppose the real market interest rate is 8%, will you purchase this stock? Briefly explain

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