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

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 -.4 and the bank estimates that 80% of its business will be from traditional services and 20% from the new services. What is the expected return of the new combined firm?

		7.2%
		6.8%
		7.6%
		9.2%
		8.4%

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