Stock prices and stand$-$alone risk

The S&P $500$ Index is one of the most commonly used benchmark indices for the U$.$S$.$ equity markets. Consisting of $500$ companies, it is a market

value$-$weighted index. This means that each company's performance is reflected in the index, weighted by the ratio of the company's value to the total

value of all the companies.

Based on your understanding of P$/$E ratios, in which of the following situations would the average trailing P$/$E ratio $($current price divided by earnings

per share over the previous $12$ months$)$ of the S&P $500$ Index be higher?

The outlook for the economy and the markets is for an improvement.

The outlook for the economy and the markets is for a downturn.

You invest $$100,000$ in only one stock. To which kind of risk will you primarily be exposed?

Portfolio risk

Stand$-$alone risk

Generally, investors would prefer to invest in assets that have:

A lower$-$than$-$average expected rate of return given its perceived risk.

A higher$-$than$-$average expected rate of return given its perceived risk.