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Mr. John Backster, a retired executive, desires to invest a portion of his assets in rental property. He has narrowed his choices to two apartment
Mr. John Backster, a retired executive, desires to invest a portion of his assets in rental property. He has narrowed his choices to two apartment complexes, Windy Acres and Hillcrest Apartments. The anticipated annual cash inflows from each are as follows: Probability Windy Acres Yearly Aftertax Cash Inflow $90,000 95,000 110,000 125,000 130,000 0.2 0.2 0.2 0.2 0.2 Hillcrest Apartments Yearly Aftertax Cash Probability Inflow $95,000 0.2 100,000 0.3 110,000 0.4 120,000 0.1 REQUIRED: a) Find the expected value of the cash flow for each apartment complex. b) What is the coefficient of variation for each apartment complex? c) Which apartment complex has more risk? Explain your
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