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    Probability distribution: What is the house portfolio's expected return on investment

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    There are two houses with almost identical characteristics available for investment in two different neighborhoods. The anticipated gain in value when the houses are sold in 10 years has the following probability of distribution.

    Probability Neighborhood A Neighborhood B
    0.25 -$22,500 $30,500
    0.40 $10,000 $25,000
    0.35 $40,500 $10,000

    If you can invest 90% of your money in the house in neighborhood A and the remaining in the house in neighborhood B, what is the portfolio expected return of your investment?

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    Solution Summary

    This solution helps with a problem about probability distribution.