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Suppose the risk-free return is 3.6% and the market portfolio has an expected return of 7.4% and a volatility of 15.8%. Merck & Co. (Ticker:

Suppose the risk-free return is 3.6% and the market portfolio has an expected return of 7.4% and a volatility of 15.8%. Merck & Co. (Ticker: MRK) stock has a 18.6% volatility and a correlation with the market of 0.059.

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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