25-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

25-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

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter2: Risk And Return: Part I

Section: Chapter Questions

Problem 2Q

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