Suppose the risk-free return is 2.7% and the market portfolio has an expected return of 7.2% and a volatility of 15.4%. Merck& Co.(Ticker: MRK) stock has a 18.5% volatility and a correlation with the market of 0.064.
a. What is Merck's beta with respect to the market?
b. Under the CAPM assumptions, what is its expected return?