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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
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 $55. The stock will pay a dividend at year-end of $2.50. Assume that risk-free Treasury securities currently offer an interest rate of 2.5% Average rates of return on Treasury bills, government bonds, and common stocks, 1900-2020 (figures in percent per year) are as follows. a. What is the discount rate on the stock? Note: Enter your answer as a percent rounded to 2 decimal places. b. What price should she be willing to pay for the stock today? Note: Do not round intermediate calculations. Round your answer to 2 decimal places
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