The table below shows annual returns for Merck and one of its major competitors, Eli Lilly. The final column shows the annual return on a portfolio invested 50% in Lilly and 50% in Merck. The portfolios 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. (EXCEL EXERCISE) Year Eli Lilly Merck 50-50 Portfolio 1 15.4% 14.9% 15.1% (0.5 x 15.4% + 0.5 x 14.9%) 2 77.2% 76.4% 3 32.6% 24.0% 4 93.6% 35.5% 5 29.1% 41.2% 6 -24.3% -7.4% 7 41.9% 41.7% 8 -14.4% -35.9% 9 -17.6% -1.1% 10 13.1% -11.2% Std. Dev.

Variance

Returns

a. Plot a graph showing the returns on Merck and Lilly each year. b. Fill in the blanks by calculating the 50-50 portfolios return each year from year 2 to year 10, 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 Merck, Lilly, and the portfolio and comment on what you find.

d.Find standard deviation, variance, and returns (PLEASE EXPLAIN STEPS HOW TO CALCULATE ON EXCEL)