Question: Suppose the Treasury bond rate is 5%, the average return on the S&P 500 index is 12%, and XYZ, Inc. has a beta of 1.5.

Suppose the Treasury bond rate is 5%, the average return on the S&P 500 index is 12%, and XYZ, Inc. has a beta of 1.5. According to the CAPM, what should be the required rate of return on XYZ stock?

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