Question
calculating expected returns. 1) you have just purchased 100 railroad cars that you plan to lease ( rent) to a large railroad company. Demand for
calculating expected returns. 1) you have just purchased 100 railroad cars that you plan to lease ( rent) to a large railroad company. Demand for shipping goods by rail has recently increased dramatically due to rising price of oil. you expect oil prices, which are currently at $98.81 per barrel, to reach $115.00 per barrel in the next year. if this happens, railroad shipping prices will increase, thereby driving up the value of your railroad cars as increase in demand outpace the rate at which new cars are being produced. given your oil price prediction, you. estimate that there is a 30 percent chance that the railroad cars will increase by 15 percent, a 40 percent chance that their value will increase by 25 percent and 30 percent chance that their value will increase by 30 percent in the next year. In addition to appreciation in the value. of your cars, you expect to earn 10 percent on your investment over the next year( after expenses) from leasing the railroad cars. what total returns do you expect to earn on your rail road cars investment over the next year?.
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