9) There are 3 potential cases for the economy (recession, growth, or high growth), and you...
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9) There are 3 potential cases for the economy (recession, growth, or high growth), and you believe that there is a 50% probability of having a recession, and 20% of growth. Today's stock price is $30. If we are in a recession, the end of year stock price is expected to be $25, and if we are in a growth scenario the stock price is expected to be $55. If we are in high growth the stock price is expected to be $100. The firm is expected to pay a $4.50 dividend at the end of the year if we are the growth and high growth scenarios, and $1 otherwise. What is the expected return for this stock? 9) There are 3 potential cases for the economy (recession, growth, or high growth), and you believe that there is a 50% probability of having a recession, and 20% of growth. Today's stock price is $30. If we are in a recession, the end of year stock price is expected to be $25, and if we are in a growth scenario the stock price is expected to be $55. If we are in high growth the stock price is expected to be $100. The firm is expected to pay a $4.50 dividend at the end of the year if we are the growth and high growth scenarios, and $1 otherwise. What is the expected return for this stock?
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