Question

only choose one, which of these investments would you choose? 4. You are given the following information. Weight (proportion of portfolio) Risk (standaro deviation of return) 3% 9% Return Hotel Hotel X Y 10% 20% 75% 25% Hotel a. Calculate the expected return of the portfolio. b. Calculate the standard deviation of the portfolio with a ρ of +1.0. C. Calculate the standard deviation of the portfolio with a ρ of 0. d. Calculate the standard deviation of the portfolio with a ρ of-10. 5. Given that the standard deviation of returns on the market is 10 percent, the standard deviation of the Hotel Lockhart is 20 percent, and the correlation coefficient of their returns is .5, calculate the beta for the Hotel Lockhart. 6. If the standard deviation of returns for the Lafayette Restaurant is 15 per- cent, the standard deviation of returns for the market portfolio is 12 percent, and the beta of the Lafayette Restaurant is .75, what is the correlation coeffi- cient for the returns of the Lafayette Restaurant and the market portfolio? 7. If the risk-free rate of return is 4 percent, the return on the market portfolio is 12 percent, and the beta of the Hotel Norwood is 1.5, calculate the expected rate of return for the Hotel Norwood. . If the expected return for the Park Hotel is 20 percent, the risk-free rate of return is 6 percent, and the return on the market portfolio is 16 percent what is the beta of the Park Hotel?

Answer 1

4)

The expected return is calculated as weighted average of expected return of Hotels X & Y

Standard deviation changes with correlation coefficients

fo 1 HOTEL Return weight risk 0.1 0.2 0.75 0.25 0.03 0.09 5 a) 6 expected return of portfolio 7 b) 8 correlation coefficient g standard deviation of portfolio 10 c) 11 correlation coefficient 12 standard deviation of portfolio 13 d) 14 correlation coefficient 15 standard deviation of portfolio 16 17 18 19 12.50% (B2*C2)+(83°C3) 4.50% SQRT(((C2"D2)"2)+((C3"D3)^2)+(2°C2"C3"88"D2" D3)) 3.18% SQRT(((C2"D2)^2)+((C3"D3JA2)+(2"C2"C3"B11"D2*D3)) 0 SQRT((C2 D2) 2)+((C3 D3)A2)+(2 C2 C3 B14 D2 D3))