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

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answerhappygod
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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

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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 $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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