Questions: Decide whether the following statement makes sense (or is clearly true) or does not make sense (or is clearly false). Explain your reasoning. I bought a fund advertised on the web that says it uses a secret investment strategy to get an annual return twice that of stocks, with no risk at all. Choose the correct answer below. A. The statement does not make sense because investing in stocks is low-risk to get high returns, thus getting higher returns than stocks with this secret strategy must mean the fund advertised on the web is low-risk, not no risk. B. The statement does make sense because this secret investing strategy must be a new financial planning strategy that does not incorporate the three traditional investment considerations: liquidity, risk, and return. C. The statement does not make sense because investing in stocks is high-risk to get high returns, thus getting higher returns than stocks with this secret strategy must mean the fund advertised on the web is high-risk, not no risk. D. The statement does make sense because the strategy indicates that the return is a predictable amount, thus the fund advertised on the web is a no-risk investment.

The answer is C: The statement does not make sense because investing in stocks is high-risk to get high returns, thus getting higher returns than stocks with this secret strategy must mean the fund advertised on the web is high-risk, not no risk.

Explanation for each option:

A. The statement does not make sense because investing in stocks is low-risk to get high returns, thus getting higher returns than stocks with this secret strategy must mean the fund advertised on the web is low-risk, not no risk.

• This option is incorrect because it incorrectly characterizes investing in stocks as low-risk. In reality, investing in stocks is generally considered high-risk due to market volatility and other factors.

B. The statement does make sense because this secret investing strategy must be a new financial planning strategy that does not incorporate the three traditional investment considerations: liquidity, risk, and return.

• This option is incorrect because it assumes that a new strategy can ignore fundamental investment principles. All investment strategies must consider liquidity, risk, and return. Ignoring these principles would not make the investment no-risk.

C. The statement does not make sense because investing in stocks is high-risk to get high returns, thus getting higher returns than stocks with this secret strategy must mean the fund advertised on the web is high-risk, not no risk.

• This option is correct. It correctly identifies that high returns are typically associated with high risk. Therefore, a claim of high returns with no risk is inherently contradictory and does not make sense.

D. The statement does make sense because the strategy indicates that the return is a predictable amount, thus the fund advertised on the web is a no-risk investment.

• This option is incorrect because predictability of returns does not equate to no risk. Even if returns are predictable, there are always risks involved in investments, such as market risk, credit risk, and operational risk. The claim of no risk is unrealistic and misleading.