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.

a)

What would be his required rate of return on Logo, Inc.s stock? (5 pts)

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). (15 pts)