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Given the following information about the Walmart’s stock and the market. State of the economy Probability...

Given the following information about the Walmart’s stock and the market.

State of the economy

Probability

Return

Boom

0.50

0.20

Normal

0.25

0.15

Bust

0.25

0.12

The risk-free rate of interest is 3 percent, the return on the market is 15 percent, and the beta of the firm is 0.8. What is the expected rate of return for the stock? Calculate the required rate of return for the stock. Should the stock be purchased?

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