IAI May 2012 Q21

This seems to be a very simple one
If an investor knows the probabilities of all the possible outcomes, the investor faces
A. Risk
B. Uncertainty
C. Certainty
D. Both risk and uncertainty

Shouldn't the answer be A as the investor knows the probability of all possible outcomes?

 

Yes.It's definitely not D. Risk is the probability of occurrence of an event and so A is correct. Don't go by what the Institute says. I'm pretty sure they have no idea what they are asking anyway. They are just trying to sound smart. I actually sat for this exam and we all know how it ended ( "cough" FA "cough")

 

Seems to me like it should be A too. You know the possible outcomes and their probabilities, so this is risk. If you know the possible outcomes but you don't know the probabilities, then this is uncertainty.