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. A set of states of the world must have probabilities that sum to 100%, and the states of the world represent all possible outcomes. The states of the world can be simplified into outcomes such as boom, bust, and normal, which are just generalized descriptions of sets of states of the world. Therefore, the correct choice is D.

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