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1. Which of the following statements is TRUE? A. Risk-Neutral Probabilities increase the probabilities of good states and decrease the probabilities of bad states. B.

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1. Which of the following statements is TRUE? A. Risk-Neutral Probabilities increase the probabilities of good states and decrease the probabilities of bad states. B. Risk-Neutral Probabilities shift the true distribution leftward because they weigh the worst states more and the best states less. C. Risk-Neutral Probabilities are used for pricing as if investors were averse to risk. D. Risk-Neutral Probabilities predict higher occurrences of larger underlying outcomes than should generally be observed in actual outcomes

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