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What price should be willing to pay for the stock today

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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 price of $48. The stock will pay a dividend at year-end of $4.00. Assume that risk-free Treasury securities currently offer an interest rate of 2.2%.

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

Question 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.)

Reference no: EM132564516

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