A real estate broker purchased three two-bedroom houses in a depressed market for a combined cost of

Question:

A real estate broker purchased three two-bedroom houses in a depressed market for a combined cost of $71,000. He expects the cleaning and repair costs on each house to average $3700, with a standard deviation of $1450. When he sells them, after subtracting taxes and other closing costs, he expects to realize an average of $39,000 per house, with a standard deviation of $1100.

a) Define your random variables and use them to create a random variable for the broker’s net profit.

b) Find the mean (expected value) of the net profit.

c) Find the standard deviation of the net profit.

d) Do you have to assume independence for the repairs and sale prices of the houses? Explain.

Broker
A broker is someone or something that acts as an intermediary third party, managing transactions between two other entities. A broker is a person or company authorized to buy and sell stocks or other investments. They are the ones responsible for...

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