Top hedge fund manager Jim Bob believes that a stock with the same market risk as the S&P 500 will sell at year-end at a

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answerhappygod
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Top hedge fund manager Jim Bob believes that a stock with the same market risk as the S&P 500 will sell at year-end at a

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Top hedge fund manager Jim Bob believes that a stock with
the same market risk as the S&P 500 will sell at year-end at a
price of $45. The stock will pay a dividend at year-end of $4.40.
Assume that risk-free treasury securities currently offer an
interest rate of 2.0%. The historical average risk premium for the
S & P 500 index is 7.8% per annum. What should be the price of
the stock Sally should be willing to pay today?
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