Which One of the Following Statements Must Be True

question 23

Multiple Choice

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 percent.
• E) Various economic states affect a portfolio's expected return but not the expected level of risk.

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Definitions:

Financial Accounting Standards Board

An independent organization responsible for establishing and improving financial accounting and reporting standards in the United States.

Pay-As-You-Go Basis

A financial approach where expenses or charges are paid for at the time of purchase or consumption, rather than on credit.

Fund Benefits

Refers to the advantages or financial aid provided by an investment fund to its investors.

Qualified Plan

A retirement plan that meets the requirements of the Internal Revenue Code and ERISA, offering tax benefits to both employers and employees.