The following statistics and estimates were compiled by Big Moon Bank regarding a proposed new branch office and the bank itself Branch office expected return 15 Standard deviation of branch return 8 Existing banks expected return 10 Standard deviation of existing banks return 5 Branch asset value ...

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The following statistics and estimates were compiled by Big Moon Bank regarding a proposed new branch office

Question:

The following statistics and estimates were compiled by Big Moon Bank regarding a proposed new branch office and the bank itself:
Branch office ............ = 15%
Standard deviation of branch return......... = 8%
Existing bank’s .......... = 10%
Standard deviation of existing bank’s return..... = 5%
Branch asset value as a percentage of total bank assets .... = 16%
Correlation of net cash flows for branch and bank as a whole .. = +0.48

Expected Return
The expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR). It is calculated by multiplying potential outcomes by the chances of them occurring and then totaling these...