Week 1 Project-Kramer Industries

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:

Kramer Industries
Year	Earnings
1990	(8% Loss)
1995	23%
2000	26%
2005	31%
2010	18%

 

Address all of the following questions:

· 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?

· 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?

· Should Allied invest in the stock? Justify your response.