What Is the Risk (Standard Deviation of Returns) on the Bank's

question 16

Multiple Choice

What is the risk (standard deviation of returns) on the bank's loan portfolio if loan returns are uncorrelated (ρ = 0) ?

• A)1.41 percent.
• B)1.63 percent.
• C)0.93 percent.
• D)3.57 percent.
• E)1.18 percent.

---

Definitions:

Egocentrism

A cognitive bias involving an inability to differentiate between one's own perspective and someone else's perspective.

Imprinting

A form of learning occurring at a specific life stage that is rapid and apparently independent of the consequences of behavior.

Infantile Amnesia

The inability of adults to recall episodic memories (memories of specific events or situations) from early childhood, typically before the age of 3-4 years.

Stranger Anxiety

A form of distress that children experience when exposed to unfamiliar people, typically observed around 7 to 10 months of age.