1 Standard Side Bank, a U.S. national bank, has $70 million in unimpaired capital and surpluses and $86 million in total time and savings deposits. Average revenue for the bank in the last three years is $12.5 million and a net interest income of $3.2 million. Pluto Inc. has applied for a loan of $9 million to the bank against which it is willing to provide $1 million worth of ten-year treasury securities. What is the maximum amount of loan the bank can make to Pluto?

$10.0 million

$9.4 million

$10.5 million

$8.5 million

$11.5 million

2. A bank is considering adding security brokerage services to the services it offers. It has estimated that the expected return and standard deviation of its traditional service are 6% and 14% respectively. It has estimated that the expected return and standard deviation of its new securities brokerage services are 14% and 24% respectively. The correlation between these services has been estimated to be -.4 and the bank estimates that 80% of its business will be from traditional services and 20% from the new services. What is the expected return of the new combined firm?

7.2%

6.8%

7.6%

9.2%

8.4%