Calculate the required rate of return for Mercury Inc., assuming that investors expect a 2.1 percent rate of inflation in the future. The real risk-free rate is equal to 1.1 percent and the market risk premium is 5.8 percent. Mercury has a beta of 1, and its realized rate of return has averaged 16 percent over the last 5 years.

9.00%

8.50%

8.00%

7.50%

7.00%