The document is an assignment for a Banks Management course. It contains instructions for submitting the assignment and 3 questions. Question 1 asks about the effect on overall return and risk of adding a new branch with given expected return, standard deviation, and correlation. Question 2 presents similar statistics for a different proposed branch and asks the same questions. Question 3 asks students to project what the financial services industry will look like in 20 years and discuss implications for current management.

1. Kingdom of Saudi Arabia
Ministry of Education
Saudi Electronic University
‫ة‬ ‫عودي‬ ‫س‬ ‫ال‬ ‫ية‬ ‫عرب‬ ‫ال‬ ‫كة‬ ‫ل‬ ‫مم‬ ‫ال‬
‫يم‬ ‫ل‬ ‫ع‬ ‫ت‬ ‫ال‬ ‫وزارة‬
‫ية‬ ‫ترون‬ ‫ك‬ ‫اإلل‬ ‫ة‬ ‫عودي‬ ‫س‬ ‫ال‬ ‫عة‬ ‫جام‬ ‫ال‬
College of Administrative and Financial Sciences
Assignment 1
FIN401 (1st Term 2021-2022)
Deadline: 18/10/2021 @ 23:59
Course Name: Banks Management
Student’s Name:
Course Code: FIN401
Student’s ID Number:
Semester: I
CRN: 12052
Academic Year: 1442/1443 H, 1st Term
For Instructor’s Use only
Instructor’s Name: Dr Firoz Alam
Students’ Grade: / 5
Level of Marks: High/Middle/Low
Instructions – PLEASE READ THEM CAREFULLY
· This assignment is an individual assignment.
· The Assignment must be submitted only in WORD format via
allocated folder.
· Assignments submitted through email will not be accepted.
· Students are advised to make their work clear and well
presented, marks may be reduced for poor presentation. This

2. includes filling your information on the cover page.
· Students must mention question number clearly in their
answer.
· Late submission will NOT be accepted.
· Avoid plagiarism, the work should be in your own words,
copying from students or other resources without proper
referencing will result in ZERO marks. No exceptions.
· All answered must be typed using Times New Roman (size 12,
double-spaced) font. No pictures containing text will be
accepted and will be considered plagiarism).
Submissions without this cover page will NOT be
accepted.
Q1. 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 bank’s marketing
department estimates that cash flows from the proposed
Washington branch will be mildly positively correlated (with a
correlation coefficient of + 0.15) with the bank’s other sources
of cash flow. The expected annual return from the bank’s
existing facilities and other assets is 10 percent with a standard
deviation of 5 percent. The branch will represent just 20 percent
of Lifetime’s total assets. Will the proposed branch increase
Forever’s overall rate of return? Its overall risk? [1.5 Marks]
Q2. The following statistics and estimates were compiled by Big
Moon Bank regarding a proposed new branch office and the
bank itself:
Branch office expected return
= 15%
Standard deviation of branch return =

3. 8%
Existing bank’s expected return =
10%
Standard deviation of existing bank’s return
= 5%
Branch asset value as a percentage of total bank assets
= 16%
Correlation of net cash flows for branch and bank as a
whole = +0.48
What will happen to Big Moon’s total expected return and
overall risk if the proposed new branch project is adopted? [1.5
Marks]
Q 3. What do you think the Financial-Services industry will
look like 20 years from now? What are the implications of your
projections for its management today? [2 Marks- 500 words
minimum]
Answer: