The table below shows annual returns on chip maker Advanced Micro Devices and the pharmaceutical producer Merck. The last column of the table shows the annual return that a portfolio invested 50% in...

The table below shows annual returns on chip maker Advanced Micro Devices and the pharmaceutical producer Merck. The last column of the table shows the annual return that a portfolio invested 50% in AMD and 50% in Merck would have earned each year. The portfolio’s return is simply a weighted average of the returns of AMD and Merck. An example portfolio return calculation for 1994 is given at the top of the table. Year AMD Merck 50-50 portfolio 1994 40.1% 14.9% 27.5%   __ 1 2  40.1%  __ 1 2  14.9%  1995 33.7% 76.4% 1996 56.1% 24.0% 1997 31.1% 35.5% 1998 63.4% 41.2% 1999 0.2% 7.4% 2000 4.5% 41.7% 2001 14.8% 35.9% 2002 59.3% 1.1% 2003 130.7% 11.2% Std. Dev. a. Plot a graph similar to Figure 6.7 showing the returns on AMD 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 AMD, Merck, and the portfolio and comment on what you fi nd.