A bank is thinking about building a new branch. They think this new branch will generate 20 percent of the business of the bank after it is opened.

A bank is thinking about building a new branch. They think this new branch will generate 20 percent of the business of the bank after it is opened. The bank expects the return for this branch will be 15 percent with a standard deviation of 5 percent. Currently the bank has a 12 percent rate of return with a standard deviation of 4 percent. The correlation between the bank and the new branch is expected to be .25. What is this bank’s total expected return after adding this branch? A. 15 percent B. 12.6 percent C. 12 percent D. 14.4 percent

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