Final answer:
The true statement about Return on Investment (ROI) is that it is always a percentage, allowing comparison between different investments. ROI can be positive or negative based on investment performance, and a higher ROI indicates a better investment. Risk factors like default risk and interest rate risk may affect ROI.
Step-by-step explanation:
When evaluating which statement is true about Return on Investment (ROI), we understand that ROI is the measure of the profitability of an investment relative to its costs. It is normally expressed as a percentage because it provides a relative measure of the investment's profitability, making it possible to compare the efficiency of several investments. Hence, the correct statement is (a) It is always a percentage. It is important to note that ROI can be a positive or negative number, depending on whether the investment has made or lost money, and contrary to option (d), a higher ROI is generally better as it indicates a more profitable investment.
Risk is the uncertainty related to the project's future profitability and includes factors such as default risk, where the borrower fails to repay, and interest rate risk, representing the risk of rates changing unfavorably. The expected rate of return is a forecast based on averages over a period and may vary based on the level of risk, with high-risk investments experiencing greater swings in actual return relative to the expected return. The actual rate of return indicates the total return on an investment after it is realized. This could include capital gains or income from interest, similar to the interest received on a bank account deposit.