Suppose a banking company decides to add insurance services to its existing products menu It expects to earn a 15

Question:

Suppose a banking company decides to add insurance services to its existing products menu It expects to earn a 15 percent average return from sales of its traditional banking products and a 25 percent return from selling or underwriting insurance services. These two service lines are equally risky in the variance of their cash flows (with a standard deviation of about 5 percent each). The banking firm expects to receive 40 percent of its revenues from insurance sales and 60 percent from sales of traditional banking products.

Calculate the bank’s overall return from sales of traditional and non-traditional products in this case.

Expert Answer:

Answer rating: 100% (QA)

To calculate the bank s overall return from sales of traditional and non traditional

View the full answer