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    Expected value, Standard Deviation, Coefficient of Variation

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    14.) Mr. Monty Terry, a real estate investor, is trying to decide between two potential small shopping center purchases. His choices are the Wrigley Village and Crosley Square. The anticipated annual cash inflows from each are as follows:

    Wrigley Village Crosley Square
    Yearly Aftertax Cash Probability Yearly Aftertax Cash Probability
    Inflow (in thousands) Inflow (in thousands)

    $10 .1 $20 .1
    30 .2 30 .3
    40 .3 35 .4
    50 .3 50 .2
    60 .1

    a. Find the expected value of the cash flow from each shopping center.

    b. What is the coefficient of variation for each shopping center?

    c. Which shopping center has more risk?

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    Solution Preview

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    Wrigley Village
    After Tax cash ...

    Solution Summary

    This post explains how to calculate the expected return and risk on investment, which provides different pay off under different scenarios. The different measures of risk are calculated such as standard deviation and coefficient of variation.

    $2.19

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