A Bank Is Planning to Set Up a New Branch

Multiple Choice

A bank is planning to set up a new branch.It expects the new branch to generate 20 percent of the total business of the bank after it is opened.The bank expects the returns on this branch to be 15 percent with a standard deviation of 5 percent.Currently the bank has a 12 percent rate of return with a standard deviation of 4 percent.The correlation between the bank's current returns and the returns on the new branch is expected to be 0.25.What is the bank's total expected return after adding this branch?

A) 15 percent
B) 12.6 percent
C) 12 percent
D) 14.4 percent
E) 15.5 percent