Instruction 5.3
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
$$\begin{array} { | c | c | c | }
\hline \text { Probability } & \text { Neighbourhood A } & \text { Neighbourhood B } \
\hline 0.25 & - \$ 22,500 & \$ 30,500 \
\hline 0.40 & \$ 10,000 & \$ 25,000 \
\hline 0.35 & \$ 40,500 & \$ 10,500 \
\hline
\end{array}$$
-Referring to Instruction 5.3,if your investment preference is to minimise the amount of risk that you have to take and do not care at all about the expected return,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?

Question

Instruction 5.3
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
 $$\begin{array} { | c | c | c | } 
\hline \text { Probability } & \text { Neighbourhood A } & \text { Neighbourhood B } \
\hline 0.25 & - \$ 22,500 & \$ 30,500 \
\hline 0.40 & \$ 10,000 & \$ 25,000 \
\hline 0.35 & \$ 40,500 & \$ 10,500 \
\hline
\end{array}$$
-Referring to Instruction 5.3,if your investment preference is to minimise the amount of risk that you have to take and do not care at all about the expected return,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?

Quizplus · Accepted Answer

The Answer of Instruction 5.3
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
 $$\begin{array} { | c | c | c | } 
\hline \text { Probability } & \text { Neighbourhood A } & \text { Neighbourhood B } \
\hline 0.25 & - \$ 22,500 & \$ 30,500 \
\hline 0.40 & \$ 10,000 & \$ 25,000 \
\hline 0.35 & \$ 40,500 & \$ 10,500 \
\hline
\end{array}$$
-Referring to Instruction 5.3,if your investment preference is to minimise the amount of risk that you have to take and do not care at all about the expected return,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?

Instruction 5 -Referring to Instruction 5