Suppose the risk-free return is 2.3% and the market portfolio has an expected return of 7.2% and

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Suppose the risk-free return is 2.3% and the market portfolio has an expected return of 7.2% and a volatility of 13.8%. Merck & Co. (Ticker: MRK) stock has a 18.2% volatility and a correlation with the market of 0.51.

a. What is Merck’s beta with respect to the market?

b. Under the CAPM assumptions, what is its expected return?

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