Which One of the Following Statements Is Correct

question 2

Multiple Choice

Which one of the following statements is correct?

• A)The risk premium on a risk-free security is generally considered to be one percent.
• B)The expected rate of return on any security, given multiple states of the economy, must be positive.
• C)There is an inverse relationship between the level of risk and the risk premium given a risky security.
• D)If a risky security is correctly priced, its expected risk premium will be positive.
• E)If a risky security is priced correctly, it will have an expected return equal to the risk-free rate.

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Definitions:

Public Law

A body of law that governs relationships between individuals and the government, including constitutional, administrative, and criminal laws.

Litigation

The process of taking legal action or engaging in a lawsuit to resolve disputes between parties.

Administrative Agencies

Government bodies responsible for the oversight and administration of specific functions, often involved in enforcing laws and regulations.

Federal Courts

Courts established by the federal government of a country, having jurisdiction over matters defined by the constitution or federal laws.