Ima\'s sister, Uma, has completed her own analysis of the economy and Wallnut\'s
ID: 2706819 • Letter: I
Question
Ima's sister, Uma, has completed her own analysis of the economy and Wallnut's stock. Uma used recession, constant growth, and inflation scenarios, but with different probabilities and expected stock returns. Uma believes the probability of recession is quite high, at 60 percent, and that in a recession, Wallnut's stock return will be -20 percent. Uma believes the scenarios of constant growth and inflation are equally likel and that Wallnut's returns will be 15 percent in the contant growth scenario and 10 percent under th inflation scenario. a. What is Uma's expected return forecast for Wallnut stock? b. What is the standard deviation of the forecast? c. If Wallnut's current price is $20.00 per share and id expected to pay a dividend of $.080 per share next year, what price does Uma expect wallnut to sell for in one year?
Explanation / Answer
Ima's sister, Uma, has completed her own analysis of the economy and Wallnut's