A Bank Is Considering Adding Security Underwriting Services to the Services

question 6

Multiple Choice

A bank is considering adding security underwriting services to the services it offers.It has estimated that the expected return and standard deviation of its traditional service are 8% and 10% respectively.It has estimated that the expected return and standard deviation of its new securities underwriting services are 16% and 20% respectively.The correlation between these services has been estimated to be -0.3 and the bank estimates that 80% of its business will be from traditional services and 20% from the new services.What is the standard deviation of the new combined firm?

• A)7.8 percent
• B)10.0 percent
• C)12.0 percent
• D)15.5 percent
• E)20.0 percent

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Definitions:

Reputation

The public perception or the general opinion about a person, organization, or thing, based on their actions, character, or achievements.

Self-Concept

A person’s knowledge and opinions about herself.

Realistic Accuracy Model

A framework for understanding how people can make accurate judgments of others' personalities.

Expectancies

Beliefs or predictions about the outcomes of certain behaviors or events.