Question

Flag Mr. Sam Golff desires to invest a portion of his assets in rental property. He has narrowed his choices down to two apartment complexes, Palmer Heights and Crenshaw Village. After conferring with the present owners, Mr. Golff has developed the following estimates of the cash flows for these properties.

Palmer Heights

Yearly Aftertax Cash Inflow (in thousands) Probability

$ 30 .2

35 .2

50 .2

65 .2

70 .2

Crenshaw Village

Yearly Aftertax Cash Inflow (in thousands) Probability

$ 35 .4

40 .2

50 .1

60 .3

a. Find the expected cash flow from each apartment complex. (Enter your answers in thousands (e.g, $10,000 should be enter as "10").) Palmer Heights: Crenshaw Village:

b. What is the coefficient of variation for each apartment complex? (Do not round intermediate calculations. Round your answers to 3 decimal places.) Palmer Heights: Crenshaw Village:

c. Which apartment complex has more risk? Palmer Heights Crenshaw Village

Answer 1

Answer (C)

Since Palmer Heights is having higher Coefficient of variance and Standard Deviation. Therefore it is to be said More risky Investment.

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