You run a house flipping business where you buy thousands of houses across the country, hire contractors to fix them up, and try to sell them. For any given house, you figure there is a 50%/50% chance of gaining 60% or losing 40%. This means your expected return per house is 0.5x0.60+0.5x(-0.40) = 0.10 = 10%. The variance per house is 0.5x(0.60-0.10)2 + 0.5x(-0.40-0.10)2 = 0.25. If the covariance between houses is 0.10, what is the variance of your portfolio of thousands of houses
Contingency Table
A contingency table can be defined as the visual representation of the relationship between two or more categorical variables that can be evaluated and registered. It is a categorical version of the scatterplot, which is used to investigate the linear relationship between two variables. A contingency table is indeed a type of frequency distribution table that displays two variables at the same time.
Binomial Distribution
Binomial is an algebraic expression of the sum or the difference of two terms. Before knowing about binomial distribution, we must know about the binomial theorem.
You run a house flipping business where you buy thousands of houses across the country, hire contractors to fix them up, and try to sell them. For any given house, you figure there is a 50%/50% chance of gaining 60% or losing 40%. This means your expected return per house is 0.5x0.60+0.5x(-0.40) = 0.10 = 10%. The variance per house is 0.5x(0.60-0.10)2 + 0.5x(-0.40-0.10)2 = 0.25. If the
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