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Question
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 -.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%
B) 10.0%
C) 12.0%
D) 15.5%
E) 20.0%
Answer
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Related questions
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B) Cash in the vault
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Interest Income
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B) The bank's use of leverage
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D) All of the above
E) None of the above
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B) Interest-rate risk
C) Operating risk
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E) Liquidity risk
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A) Credit risk
B) Liquidity risk
C) Interest-rate risk
D) Operational risk
E) None of the above
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A) Profit margin.
B) Asset utilization.
C) Equity multiplier.
D) Earnings retention ratio.
E) All of the above.
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is long-term debt capital whose claims legally follow claims of depositors.
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represents funds set aside for contingencies such as legal action against the institution as well as providing a reserve for dividends expected to be paid but not yet declared and a sinking fund to retire stock or debt in the future.