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, 1900-2015 (figures in percent per year) are as follows.

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

Treasury bills 3.8

Treasury bonds5.3 1.5

Common stocks 11.4 7.6

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

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