Buc-EEs Holdings Inc. operates gas stations and general merchandise stores. Buc-EEs is considering an upstream vertical integration by taking over Marathon Petroleum Corp., an oil refinery firm. You are the financial analyst of Buc-EEs and are asked to collect historical data on the risk-free rates and the market risk premiums. Your estimates as of November 2049 are summarized as follows:

a) Determine the risk-free rate and the market risk premium that are appropriate to use in the CAPM equation. Provide the rationale for your choice (approx. 100 words). (Lecture notes pp.21-24)

\begin{tabular}{ccc} \hline & \multicolumn{2}{c}{ Mean, annualized } \\ \cline { 2 - 3 } Estimation period & Risk-free rate & Market risk premium \\ \hline Sep 2049-Oct 2049 & 0.04 & -0.03 \\ Jan 2020-Oct 2049 & 0.07 & 0.06 \\ \hline \end{tabular}