Problem 1
The Clayton Hotel is expected to generate different returns based on the state of the economy. These are shown in the following figure
State of the economy	Probability of each state	Return
Recession	10%	-5%
Moderate growth	60%	6%
Boom	30%	18%
a. Calculate the expected return for the Clayton Hotel using a simple average.
6.33%
b. Calculate the expected return for the Clayton Hotel using a weighted average.
8.50%
Problem 2
Based on the information in Problem 1, complete the following for the Clayton Hotel.
a. Calculate the variance.
0.49%
b. Calculate the standard deviation.
7.00%
c. Interpret the standard deviation relative to the normal distribution.