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:
$10 .1 $20 .1
30 .2 30 .3
40 .3 35 .4
50 .3 50 .2
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?
The solution explains how to calculate the coefficient of variation and use it to assess risk.