Which one of the following statements must be true?
A)All securities are projected to have higher rates of return when the economy booms versus when it is normal.
B)Considering the possible states of the economy emphasizes the fact that multiple outcomes can be realized from an investment.
C)The highest probability of occurrence must be placed on a normal economy versus either a boom or a recession.
D)The total of the probabilities of the economic states can vary between zero and 100%.
E)Various economic states affect a portfolio's expected return but not the expected level of risk.

Question

Quizplus · Accepted Answer

Considering the possible states of the economy emphasizes the fact that multiple outcomes can be realized from an investment. This is a fundamental principle of investment analysis and is true regardless of the specific securities or economic conditions being considered. The other statements are either incorrect (such as A, C, and D) or incomplete (such as E, which does not mention how economic states affect risk).

Which One of the Following Statements Must Be True