Instruction 5-5
There Are Two Houses with Almost Identical Characteristics

question 71

Short Answer

Instruction 5-5
There are two houses with almost identical characteristics available for investment in two different neighbourhoods with drastically different demographic composition.The anticipated gain in value when the houses are sold in 10 years has the following probability distribution:
Returns
$$\begin{array} { | c | c | c | } \hline \text { Probability } & \text { Neighbourhood A } & \text { Neighbourhood B } \\\hline .25 & - \$ 22,500 & \$ 30,500 \\\hline .40 & \$ 10,000 & \$ 25,000 \\\hline .35 & \$ 40,500 & \$ 10,500 \\\hline\end{array}$$
-Referring to Instruction 5-5,if you can invest 90% of your money on the house in neighbourhood A and the remaining on the house in neighbourhood B,what is the portfolio risk of your investment?

---

Definitions:

External Rotation

A movement or exercise where a limb or part of the body is rotated away from the center of the body, often used in physical therapy and fitness.

Abduction

Movement away from the body.

Ice Pack

A portable bag filled with ice or refrigerant gel used to reduce swelling, relieve pain, or decrease inflammation by applying cold temperatures to affected areas.

Swelling

An enlargement of a body part caused by an accumulation of fluid or inflammation in tissues.