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Suppose the risk-free return is 2.3% and the market portfolio has an expected return of 11.7% and a voatility of 12.7%. Merck & Co. (Ticker: MRK) stock has a 17.3% 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?

Suppose the risk-free return is 2.3% and the market portfolio has an expected return of 11.7% and a voatility of 12.7%. Merck & Co. (Ticker: MRK) stock has a 17.3% 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?

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Please answer subpart a and b

Suppose the risk-free return is 2.3% and the market portfolio has an expected return of 11.7% and a voatility of 12.7%. Merck & Co. (Ticker: MRK) stock has a 17.3% 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? Question content area bottom Part 1 a. What is Merck's beta with respect to the market? Merck's beta with respect to the market is (Round to three decimal places.) Part 2 b. Under the CAPM assumptions, what is its expected return? Under the CAPM assumptions, its expected return is (Round to two decimal places.)
Transcribed Image Text:Suppose the risk-free return is 2.3% and the market portfolio has an expected return of 11.7% and a voatility of 12.7%. Merck & Co. (Ticker: MRK) stock has a 17.3% 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? Question content area bottom Part 1 a. What is Merck's beta with respect to the market? Merck's beta with respect to the market is (Round to three decimal places.) Part 2 b. Under the CAPM assumptions, what is its expected return? Under the CAPM assumptions, its expected return is (Round to two decimal places.)
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