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 $46. The stock will pay a dividend at year-end of $3.00. Assume that risk-free Treasury securities currently offer an interest rate of 2.4%.

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

PortfolioAverage Annual

Rate of Return (%)Average Premium (Extra return

versus Treasury bills) (%)Treasury bills3.8Treasury bonds5.31.5Common stocks11.57.7

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.)