Answer:
The required return on equity is 17%.
Explanation:
The required rate of return is the minimum return required by the investors to invest in a stock. The required rate of return is calculated under the CAPM approach based on the the stock's beta, the risk free rate and the market risk premium. The formula for the required rate of return is,
r = rRF + beta * rpM
r = 0.05 + 1.5 * 0.08
r = 0.17 or 17%
