Problem:

A. Borrower Rating                          Loan Amount   Expected Return  Standard Deviation
    A                                                   $40 million        12 percent        1 percent
    B                                                   $20 million        15 percent        2 percent
    C                                                   $30 million        18 percent        3 percent

1. What is the FI's expected return on its loan portfolio?

a. 15.00 percent.
b. 18.00 percent.
c. 12.00 percent.
d. 14.67 percent.
e. 13.33 percent.

2. What is the risk (standard deviation of returns) on the bank's loan portfolio if loan returns are uncorrelated (r = 0)?

a. 1.41 percent.
b. 1.63 percent.
c. 0.93 percent.
d. 3.57 percent.
e. 1.18 percent.

Additional Information:

This question basically from Finance and it is about computing the financial institution's expected return on its loan portfolio with standard deviation and loan amounts given.