Top hedge fund manager Sally Burrit believes that a stock with the same market risk...
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Top hedge fund manager Sally Burrit believes that a stock with the same market risk as the S&P 500 will sell at year-end at a price of $50. The stock will pay a dividend at year-end of $2. Assume that risk-free Treasury securities currently offer an interest rate of 2% Average rates of retum on Treasury bills, government bonds, and common stocks, 1900-2017 (gures in percent per year) are as follows Average Premium (extra Average Annual return Rate of Return verse Treasury bills) Portfolio Treasury bills Treasury bonds 5.3 Common stocks (5) 1.5 7.7 What is the discount rate on the stock? (Enter your answer as a percent rounded to 2 decimal places.) 0.70 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.) Sock pre
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