Which of the Following Statements Is True

question 55

Multiple Choice

Which of the following statements is true?

• A)One advantage of using MPT for loans is that the returns on individual loans are normally distributed, meaning that the upside returns are equal to the downside risks.
• B)One objection to using MPT for loans is that the returns on individual loans are not normally distributed, meaning that most loans have unlimited upside returns and long-tail downside risks.
• C)One advantage of using MPT for loans is that the returns on individual loans are normally distributed, meaning that most loans have unlimited upside returns and unlimited downside risks.
• D)One objection to using MPT for loans is that the returns on individual loans are not normally distributed, meaning that most loans have limited upside returns and long-tail downside risks.

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Definitions:

Unemployment Compensation

Financial payments made to individuals who have lost their jobs until they find new employment, provided by the government or insurance programs.

Social Security

A government program designed to provide financial assistance to retirees, disabled individuals, and survivors of deceased workers.

Externalities

Economic side effects or consequences of an industrial or commercial activity that affect other parties without being reflected in the cost of the goods or services involved, either positively (benefits) or negatively (costs).

Third Parties

Third parties refer to individuals or entities that are not directly involved in a transaction or agreement but may be indirectly affected or have an interest in it.