Top hedge fund manager Sally Buffit believes that a stock with the same market risk as the S&P 500 will sell at year-end at a price of $47. The stock will pay a dividend at year-end of $2.00. Assume that risk-free Treasury securities currently offer an interest rate of 2.3%.

Average rates of return on Treasury bills, government bonds, and common stocks, 1900-2017 (figures in percent per year) are as follows.

Portfolio Average Annual Rate of Return (%) Average Premium (Extra returnversus Treasury bills) (%)

Treasury bills 3.8

Treasury bonds 5.3 1.5

Common stocks 11.5 7.7

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

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