XY International, a bank holding company, reported earnings per share of $3.40 in 2016, and paid dividends per share of $2.06. The earnings were expected to grow 1,8% a year in the long term. The stock had a beta of 1.05 and traded for ten times earnings. The treasury bond rate was 2% and the equity risk premium was 5,5%.

a) Estimate the P/E Ratio for XY international.

b) What long term growth rate is implied in the firm's current P/E ratio?