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

question 103

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 30% 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:

Psychological Illness

Disorders that affect mood, thinking, and behavior, encompassing a wide range of conditions such as depression, anxiety disorders, and schizophrenia.

Cohabitants

Cohabitants are individuals who live together in the same dwelling, often in a romantic relationship, without being legally married.

Married People

Socially and legally recognized union between two individuals in a personal relationship.

Rewards

Benefits or positive outcomes that are given in response to an individual's actions or behaviors.