When considering expected returns,what is true about the states of the world?
A)They must have probabilities that sum to 100%.
B)They represent all possible outcomes.
C)They are sometimes simplified into outcomes such as boom,bust,and normal.
D)Statements A through C are all true.

Question

Quizplus · Accepted Answer

All three statements are true when considering expected returns. The states of the world must have probabilities that sum to 100% in order to represent all possible outcomes. These states can sometimes be simplified into outcomes such as boom, bust, and normal. Therefore, all three choices (A through C) are true.

When Considering Expected Returns,what Is True About the States of the World