A). Jackson is deciding to purchase shares of Logo, Inc.'s stock with a beta of 1.7. He observes that the market risk premium is 8 percent, and a return on T-bills is 4 percent.

-What would be his required rate of return on Logo, Inc.'s stock?

B). Assume Jackson purchased Logo, Inc., stock for $30 a share and would sell it for $36 a share three years later. Over the next three years he would receive an average annual dividend of $3. Please evaluate the stock performance. (Hint: use the approximate compound yield (ACY) to compare with the required rate of return).