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

question 37

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 half 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?

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Definitions:

Cholesterol

A sterol present in the tissues that contributes to heart disease when elevated; transported in the blood plasma of all animals.

Blood Pressure

The amount of force exerted by the heart on the blood as it pumps the blood through the arteries.

Hyponatremia

A condition where there is an abnormally low sodium concentration in the blood.

Sodium Deficiency

A condition that occurs when the level of sodium in the blood falls below the normal range, potentially leading to symptoms like headache, nausea, and weakness.