1)- A bank holds a loan portfolio with the following characteristics:

Loan i	Xi	Annual spread between loan rate and banks cost of funds	Annual fees	Loss to bank given default	Expected default frequency	Correlation
1	.6	6%	3%	20%	3%	-0.2
2	.4	5%	2%	30%	5%

Question: what is the return and standard deviation on loan portfolio?

	A.	7.24%, 2.98%
	B.	7.78%, 6.05%
	C.	7.78%, 2.98%
	D.	7.24%, 6.05%

2)- Information concerning the allocation of loan portfolios to different market sectors is given below:

Allocation of Loan Portfolios in Different Sectors (%)

Sectors National Bank A Bank B

Commercial 30% 50% 10%

Consumer 40% 30% 40%

Real Estate 30% 20% 50%

Question: Whats the portfolio deviation from the national average for Bank A and Bank B, respectively?

	A.	12.48%, 16.33%
	B.	14.14%, 15.59%
	C.	12.48%, 15.59%
	D.	14.14%, 16.33%