4. Company ABCs stock is currently priced at $100. It pays an annual dividend of $3.00. If you purchase the stock today at that price, calculate the following.

a. What is your annualized return if in 3 years you sell the stock at $125.00? Ignore taxes.

b. If the Beta of ABC is 0.7 and the risk-free rate is 3%. Given an expected return for the market as 10% (the market risk premium is 7%), would the annualized return you calculated in A be acceptable if we used it as our expected return for the near year (this would become our expected return)? Quantify and Explain