The table below shows annual returns for Merck and one of its major competitors, Eli Lilly. The fi nal column shows the annual return on a portfolio invested 50% in Lilly and 50% in Merck. The...

The table below shows annual returns for Merck and one of its major competitors, Eli Lilly. The fi nal column shows the annual return on a portfolio invested 50% in Lilly and 50% in Merck. The portfolio’s return is simply a weighted average of the returns of the stocks in the portfolio, as shown in the example calculation at the top of the table. Year Eli Lilly Merck 50-50 portfolio 1994 15.4% 14.9% 15.1%   __12  15.4%  __12  14.9%  1995 77.2% 76.4% 1996 32.6% 24.0% 1997 93.6% 35.5% 1998 29.1% 41.2% 1999 24.3% 7.4% 2000 41.9% 41.7% 2001 14.4% 35.9% 2002 17.6% 1.1% 2003 13.1% 11.2% Std. Dev. a. Plot a graph similar to Figure 6.7 showing the returns on Lilly and Merck each year. b. Fill in the blanks in the table above by calculating the 50-50 portfolio’s return each year from 1995–2003 and then plot this on the graph you created for part (a). How does the portfolio return compare to the returns of the individual stocks in the portfolio? c. Calculate the standard deviation of Lilly, Merck, and the portfolio and comment on what you fi nd.