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Sir
I don’t understand how they come up with the asset beta hotel services of.75
I did 1.1 be with 50/50 which gave me .61, then (.61 x .6) + (.4 x .4) = .366 +.16 = .526 Ba
0.61 is the total asset beta of the company, which is therefore equal to (0.6 x asset beta of hotel) + (0.4 x asset beta of property (which is 0.4).
So you have to work backwards to get the asset beta of hotel.
This is a common exercise in the exam, and I go through examples of it in my free lectures.
I did that and it doesn’t match the answer book. that is my calculation. Mine comes to .526 and BPP come to .45
what they have done it seems is deduct the .16 from the .61 and got .45, whereas if you take .61 x .6 you get .366 and adding .16 gets .526…I don’t understand how that works quite honestly but it does
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