The Variance of Returns of a Portfolio of Loans Normally

question 9

True/False

The variance of returns of a portfolio of loans normally is equal to the arithmetic average of the variance of returns of the individual loans.

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Definitions:

Federal Reserve System

The central banking system of the United States, responsible for monetary policy, regulation of financial institutions, and ensuring financial stability.

UCC

Governing all commercial activities in the United States, the Uniform Commercial Code is a complete assembly of legal rules.

Savings and Loans

Financial institutions traditionally focused on accepting savings deposits and making mortgages and other loans.

Credit Unions

Member-owned financial cooperatives that provide savings, credit, and other financial services to their members with typically favorable interest rates and terms.