Nancy and Mauro are reviewing the information given below for different reasons. Nancy is a bank loan officer who has received a 2-year, $50,000 loan application from both firms. Mauro is an independently wealthy investor who is considering investing $50,000 in a company. The information below is just one part of a complete data set about the companies that both persons are reviewing. The data reveal the profit history of the two firms over the last seven years. The companies are very similar except for the way in which their profits vary over the years. (All dollar amounts are in thousands.)

Required
A. Explain the concept of risk and its usual relationship to return on investment.
B. If you were Nancy, would you be more likely to make the loan to Hill Country or to Low Land? Why?
C. If you were Mauro, would you be more likely to invest in Hill Country or Low Land? Why?
D. Suppose the financial information of Low Land Associates (but not that of Hill Country Enterprises) has been audited and verified as being in conformance with generally accepted accounting principles. Would that change your responses to parts (b) and (c)above?

Profits 2004 2003 2002 2001 2000 1999 1998 Total Hill Country Enterprises 337 315 303 268 207 225 201 1,856 Low Land Associates 730 (55 (10 598 131) 619 498 2,249