The Chahad Bank Wants to Open a New Branch in a Distant

question 108

Multiple Choice

The Chahad Bank wants to open a new branch in a distant city with very different economic conditions.Currently,the bank has an expected return of 15% with a standard deviation of 7%.The new branch is expected to have a return of 20% with a standard deviation of 10%.The correlation between the bank's returns and the returns from the new branch is -0.3.The new branch is expected to contribute 10% of the bank's revenues.What is the expected return for the bank if they add the new branch?

• A)35%
• B)19.5%
• C)17.5%
• D)15.5%
• E)-15.9%

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