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Question
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
Answer
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