Murphy National Bank Is Thinking About Adding a New Branch

question 87

Multiple Choice

Murphy National Bank is thinking about adding a new branch in a very different market area.It estimates that the new office will have an expected return of 16% with a standard deviation of 8%.Currently,it has an expected return of 12% with a standard deviation of 4%.The correlation between the returns on the new branch and the bank's current returns is estimated to be 0.20.The bank estimates that the new branch will represent 15 percent of the revenues of the bank.What is the bank's expected risk (measured by the standard deviation) with the new branch? Round to the nearest 0.1 percent.

• A)14.6 percent
• B)3.8 percent
• C)4.6 percent
• D)7.4 percent
• E)5.8 percent

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Definitions:

Total Utility

The total satisfaction or benefit received by consuming a given total quantity of a good or service.

Marginal Utility

The additional utility derived from consuming one more unit of some good or service.

Consumer Surplus

The difference between the amount consumers are willing to pay for a good or service versus what they actually pay.

Demand Curve

A graph showing the relationship between the price of a good and the quantity of the good that consumers are willing and able to purchase at various prices.