Which of the Following Statements Is Correct

question 14

Multiple Choice

Which of the following statements is correct?

• A) A complete probability distribution is always an objective listing of all possible events.Since it is impossible to list all the possible outcomes from a single event,probability distributions are of limited benefit in assessing risk.
• B) A peaked probability distribution centered around the expected value will make a stock more desirable,thereby increasing its expected return.
• C) In the real world,there are an infinite number of possible states or outcomes that can occur.Thus,probability distributions actually are continuous;however,for simplicity,financial managers typically reduce the number of states for analysis to a manageable number.
• D) Risk refers to the chance that some unfavorable event will occur while a probability distribution is completely described as a listing of the likelihood of unfavorable events.
• E) The higher the probability that the return from an investment will pay off its average promised value the lower will be the expected return,regardless of the distribution of the investment's returns.

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Definitions:

Trade Deficit

Occurs when a country's imports exceed its exports during a specific period, indicating a negative balance of trade.

Billion

A numerical value representing one thousand million (1,000,000,000).

Dollar-Denominated Assets

Financial assets such as bonds, stocks, or bank deposits that are measured in U.S. dollars.

Foreign Investment

Foreign investment involves capital flows from one country to another, granting the investor ownership stakes in foreign companies or assets, aiming for future returns on the investments.