Gamma Bank estimates its monthly portfolio volatility at 5%.

Identify the monthly volatility:Monthly volatility (σ_monthly) = 5%

Convert monthly volatility to annual volatility:Annual volatility (σ_annual) is calculated by multiplying the monthly volatility by the square root of the number of periods in a year:

????????????????????????????=????????????????????ℎ????????×12σannual​=σmonthly​×12​

Calculate:

\sigma_{annual} = 0.05 \times \sqrt{12} \approx 0.05 \times 3.464 = 0.1732 \text{ or 17.32%}

The closest option to this calculation is B. 17%.