CAPM AND REQUIRED RETURN

Calculate the required rate of return for Mudd Enterprises assuming that investors expect a 3.9% rate of inflation in the future. The real risk-free rate is 2%, and the market risk premium is 3.5%. Mudd has a beta of 1.2, and its realized rate of return has averaged 12.5% over the past 5 years. Round your answer to two decimal places.

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