Question

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
$	80				.2
	85				.2
	100				.2
	115				.2
	120				.2

  

Crenshaw Village
Yearly Aftertax Cash Inflow (in thousands)				Probability
$	85				.2
	90				.3
	100				.4
	110				.1

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

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

  
c. Which apartment complex has more risk?
  

	Palmer Heights
	Crenshaw Village

Answer 1

C)

• The coefficient of variation (CV) is a statistical measure of the dispersion of data points in a data series around the mean.
• In finance, the coefficient of variation allows investors to determine how much volatility, or risk, is assumed in comparison to the amount of return expected from investments.
• The lower the ratio of standard deviation to mean return, the better risk-return trade off