You believes that a stock with the same market risk as the S&P 500 will sell at year-end at a price of $60. The stock will pay a dividend at year-end of $3. 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, 1950-2022 (figures in percent per year) are as follows. Portfolio T-bills T-bonds Common stocks Answer% Avg. Annual Rate Avg. Premium over of Return (%) vs. Treasury Bills (%) Answer $ 3.5 5.5 11.3 1.8 Input your answers with two decimals. a) What is the discount rate on the stock? (5 pts) b) What price should you be willing to pay for the stock today? (5 pts) 7.6

You believes that a stock with the same market risk as the S\&P 500 will sell at year-end at a price of $60. The stock will pay a dividend at year-end of $3. Assume that risk-free Treasury securities currently offer an interest rate of 2.5%. Average rates of retum on Treasury bills, government bonds, and common stocks, 1950-2022 (figures in percent per year) are as follows. Input your answers with two decimals. a) What is the discount rate on the stock? ( 5 pts) b) What price should you be willing to pay for the stock today? ( 5 pts) Answer %