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

Question 37

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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 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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