Top hedge fund manager Diana Sauros believes that a stock with the same market risk as the S&P 500 will sell at year-end at a price of $43. The stock will pay a dividend at year-end of $3.00. Assume that risk-free Treasury securities currently offer an interest rate of 1.8%.

Average rates of return on Treasury bills, government bonds, and common stocks, 19002013 (figures in percent per year) are as follows.

PortfolioAverage Annual

Rate of ReturnAverage Premium (Extra return

versus Treasury bills)Treasury bills3.9Treasury bonds5.21.3Common stocks11.57.6

What is the discount rate on the stock?(Enter your answer as a percent rounded to 2 decimal places.)

Discount rate%

What price should she be willing to pay for the stock today?(Do not round intermediate calculations.Round your answer to 2 decimal places.)

Stock price$