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?

Forecast earnings for S&P $500$ companies are expected to rise in the future.

Forecast earnings for S&P $500$ companies are expected to fall in the future.

You invest $$100,000$ in $40$ stocks, $20$ bonds, and a certificate of deposit $($CD$).$ 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 high level of risk and low expected returns.

A low level of risk and high expected returns.