Forever Savings Bank estimates that building a new branch office in the newly developed Washington township will yield an annual expected return of 12 percent with an estimated standard deviation of 10 percent. The banks marketing depart-ment estimates that cash flows from the proposed Washington branch will be mildly positively correlated (with a correlation coefficient of + 0.15) with the banks other sources of cash flow. The expected annual return from the banks existing facilities and other assets is 10 percent with a standard deviation of 5 percent. The branch will represent just 20 percent of Lifetimes total assets. Will the proposed branch increase Forevers overall rate of return? Its overall risk?

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