The Allied Group has acquired Kramer Industries and is now considering additional investments. They have determined that there is a firm that is a good fit for their portfolio, the Kramer firm of Montana. The firm was established in 1990 and has the following historical returns:
Questions: Address all of the following questions in a brief but thorough manner.
- What was the average return for the stock over the period of 1990 through 2010?
- What was the standard deviation for the stock over this period?
- Justified whether or not the company should be purchased
- Assume that you currently have a portfolio that returns 19.5%. If you add this stock to the current portfolio, what would happen to the average return on the portfolio?
- Correctly identified the result of adding Kramer to your existing portfolio.
- Should Allied invest in the stock? Justify your response.