28. National City Corporation, a bank holding company, reported earnings per share of $2.50 in 19gs, and paid dividends per share of $1.10. The earnings had grown 6.5% over the prior five years, and were expected to grow 4.5% a year in the long term. The stock had a beta of 1.2 and traded for 12 times trailing earnings. Assume a T-bond rate of 3.5% and an equity risk premium of 5.5%. (10 points)

a Estimate a theoretical trailing PE for National Citv.

b What long-term growth rate does the actual market trailing PE imply: