Question
1-Suppose the risk-free return is 3.5% and the market portfolio has an expected return of 11.2% and a volatility of 17.9%. Merck & Co. (Ticker:
1-Suppose the risk-free return is 3.5% and the market portfolio has an expected return of 11.2% and a volatility of 17.9%. Merck & Co. (Ticker: MRK) stock has a 21.5% volatility and a correlation with the market of 0.045.
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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Valuation Measuring and managing the values of companies
Authors: Mckinsey, Tim Koller, Marc Goedhart, David Wessel
5th edition
978-0470424650, 9780470889930, 470424656, 470889934, 978-047042470
