Top hedge fund manager Sally Buffit believes that a stock with the same market risk as the

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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 $41. The stock will pay a dividend at year-end of $2.00. Assume that risk-free Treasury securities currently offer an interest rate of 1.6%.

Average rates of return on Treasury bills, government bonds, and common stocks, 1900-2017 (figures in percent per year) are as follows.

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

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.)

Posted Date: May 19, 2024 02:03 PM

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Top hedge fund manager Sally Buffit believes that a stock with the same market risk as the

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