a) A stock index stands at 1806 at the end of the year. Next year's earnings for the firms included in the index are forecasted to be 146. The current book value of equity for the same firms is 902. Use a required rate of return of 9% and compute the long-term growth rate that is implied by the index level. You can assume that the long-term growth rate is constantt from next year and onwards.

b) The market price of a stock is 1033. The book value per share is 300, whereas the forecasted earnings per share for the next year is 40. Assume that the long-term growth rate is constant from next year and onwards and equal to 3%. What is the expected return from buying the stock at the current market price.