A Bank Is Considering Adding Security Brokerage Services to the Services

question 57

Multiple Choice

A bank is considering adding security brokerage services to the services it offers.It has estimated that the expected return and standard deviation of its traditional service are 6% and 14% respectively.It has estimated that the expected return and standard deviation of its new securities brokerage services are 14% and 24% respectively.The correlation between these services has been estimated to be -0.4 and the bank estimates that 60% of its business will be from traditional services and 40% from the new services.What is the standard deviation of the new combined firm?

• A)24.00 percent
• B)18.00 percent
• C)15.07 percent
• D)14.00 percent
• E)9.91 percent

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