Computing the financial institution expected return

Assignment Help Finance Basics

Reference no: EM13827812

Problem:

A. Borrower Rating                          Loan Amount   Expected Return Standard Deviation
   A       $40 million       12 percent       1 percent
   B                                                   $20 million       15 percent       2 percent
   C                                                   $30 million       18 percent       3 percent

1. What is the FI's expected return on its loan portfolio?

a. 15.00 percent.
b. 18.00 percent.
c. 12.00 percent.
d. 14.67 percent.
e. 13.33 percent.

2. What is the risk (standard deviation of returns) on the bank's loan portfolio if loan returns are uncorrelated (r = 0)?

a. 1.41 percent.
b. 1.63 percent.
c. 0.93 percent.
d. 3.57 percent.
e. 1.18 percent.

Additional Information:

This question basically from Finance and it is about computing the financial institution's expected return on its loan portfolio with standard deviation and loan amounts given.

Reference no: EM13827812

Questions Cloud

Intercepting regression of sectoral loan losses : A regression of sectoral loan losses against total loans losses, both measured as a percentage of total loans, of a bank results in the following beta coefficients for the real estate (RE) and commercial (CL) loan variables: bRE = 1.2, bCL = 1.6. ..

Report on internal and external environment analysis of air : Report On Internal And External Environment Analysis Of Air Asia

Computing the probability of drawing a green ball from bag : This problem related to Basic Statistics and it is about computing the probability of drawing a green ball from a bag of colored balls

Computing two banks standard deviation : What is Bank A's standard deviation of its asset allocation proportions relative to the national banks average?

Computing the financial institution expected return : What is the FI's expected return on its loan portfolio?

Scenario about zhiang liang corporation : Please read the case study PDF document and data from the Excel sheet attached and answer the questions.

What is the probability that you draw a blue ball : A bag contains 120 balls. Out of this 120 balls 30 of them are blue, 50 of them are pink and 40 of them are green. What is the probability that you draw a blue ball out of this bag

Taxable gross income of a single tax payer : Tommy, a single taxpayer with no dependents, has the following items that may affect his taxable income. What is his adjusted gross income?

Discuss type i and type ii errors and their critical role : These problems related to Basic Statistics and discuss about type I and type II errors and their critical role in statistical tests

User Account

All Pages