A bank is planning to set up a new branch. It expects the new branch to generate 25 percent of the total business of the bank after it is opened. The bank expects the returns on this branch to be 15 percent with a standard deviation of 5 percent. Currently the bank has a 12 percent rate of return with a standard deviation of 4 percent. The correlation between the bank's current returns and the returns on the new branch is expected to be 0.20. What is the bank's total expected return after adding this branch?

a. 12.75 %

b. 12.6%

c. 13.25%

d.14.4%

e.15.5%

2- Second National Bank is considering adding 5 new ATM machines. Each machine costs $25,000 and installation costs are $15,000 per machine. Second National Bank expects the new machines to save $0.33 per transaction on 250,000 transactions per year on the new machines. It also expects the new machines to last for 25 years. If the bank needs to earn 14 percent return on this investment, what is the net present value of this investment?

A.

$506,729

B.

$306,729

C.

$272,269

D.

$381,729

E.

$424,228