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

question 150

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
 Probability  Neighbourhood A  Neighbourhood B .25$22,500$30,500.40$10,000$25,000.35$40,500$10,500\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 your investment preference is to maximise your expected return while exposing yourself to the minimal amount of risk,will you choose a portfolio that will consist of 10%,30%,50%,70%,or 90% of your money on the house in neighbourhood A and the remaining on the house in neighbourhood B?

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Definitions:

Concrete-operational Thought

A stage in Piaget's theory of cognitive development during which children gain the ability to think logically about concrete events.

Formal-operational Thought

The fourth and final stage of Piaget's theory of cognitive development, characterized by the ability to think abstractly, logically, and systematically.

Hypothetical-deductive Reasoning

A method of problem solving or decision-making that starts with a hypothesis or question and involves deducing specific predictions and testing them.

Adolescent Egocentrism

Adolescent egocentrism is a phase in teenage development characterized by a heightened focus on oneself and the belief that one's thoughts, feelings, and experiences are unique.

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