Figure 3-1 -Refer to Figure 3-1.Suppose Cliff Must Work 5 Hours to Work

question 71

Multiple Choice

Figure 3-1

-Refer to Figure 3-1.Suppose Cliff must work 5 hours to produce each bushel of corn.Then Cliff

• A)must work 3 1/3 hours to produce each bushel of wheat, and his opportunity cost of a bushel of corn is 2/3 bushel of wheat.
• B)must work 3 1/3 hours to produce each bushel of wheat, and his opportunity cost of a bushel of corn is 1.5 bushels of wheat.
• C)must work 7.5 to produce each bushel of wheat, and his opportunity cost of a bushel of corn is approximately 2/3 bushel of wheat.
• D)must work 7.5 hours to produce each bushel of wheat, and his opportunity cost of a bushel of corn is 1.5 bushels of wheat.

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Definitions:

Time Horizon

The length of time an investor expects to hold an investment before taking money out.

Bond Portfolio Immunization

A strategy to minimize the impact of interest rate fluctuations on the market value of a bond portfolio by matching the portfolio's duration with the investor’s investment horizon.

Price Risk

The risk that the price of a financial asset will fluctuate, affecting the profit or loss of an investment.

Reinvestment Risk

The risk that future proceeds will have to be reinvested at a lower potential interest rate.