TABLE 5-7
There Are Two Houses with Almost Identical Characteristics $\quad$

question 163

Short Answer

TABLE 5-7
There are two houses with almost identical characteristics available for investment in two different neighborhoods with drastically different demographic composition. The anticipated gain in value when the houses are sold in 10 years has the following probability distribution:
$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { Returns }$
$\begin{array}{l}\begin{array} { c c c } \text { Probability}& \text { Neighb or hood A}& \text { Neighb or hood B } \\\hline .25 & - \$ 22,500 & \$ 30,500 \\.40 & \$ 10,000 & \$ 25,000 \\.35 & \$ 40,500 & \$ 10,500\end{array}\end{array}$



-Referring to Table 5-7, what is the total variance of value gain if you invest in both houses?

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