What is the probability of reaching expected irr

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Problem 1: You are considering an investment in an industrial property. Initially you defined the expected rent growth to be normally distributed with a mean of 3% and standard deviation of 2% and calculated your probability of reaching your expected IRR of 11.5% to be 48%. After a closer examination, due to many long leases in place, you have decided that the rent growth is better defined as being normally distributed with a mean of 2.5% and standard deviation of 1.5%. What is the probability of reaching your expected IRR of 11.5% using this new definition?

48% - The way rent growth is defined should not affect the IRR
Higher than 48% - because the redefined standard deviation of rent growth is lower
Higher than 48% - because the redefined mean of rent growth is lower
Lower than 48% - because the redefined standard deviation of rent growth is lower
Lower than 48% - because the redefined mean of rent growth is lower

Reference no: EM132913851

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