A Bank Is Considering Adding Security Underwriting Services to the Services

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 -0.3 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?

A) 8.0 percent
B) 9.6 percent
C) 12.0 percent
D) 14.4 percent
E) 16 percent

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