Table 3-5 -Refer to Table 3-5. Which of the Following Is Correct

question 126

Multiple Choice

Table 3-5

-Refer to Table 3-5. Which of the following is correct?

• A)Canada has an absolute advantage in airplanes and Japan has an absolute advantage in cars.
• B)Canada has an absolute advantage in neither good and Japan has an absolute advantage in both goods.
• C)Canada has an absolute advantage in cars and Japan has an absolute advantage in airplanes.
• D)Canada has an absolute advantage in neither good and Japan has an absolute advantage in cars.

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Definitions:

CAPM

The Capital Asset Pricing Model, a theory used to determine the expected return on investment based on its inherent risk and the cost of capital.

Expected Return

The anticipated profit or loss from an investment based on its potential risks and rewards.

SML

The Security Market Line (SML) represents the relationship between the expected return of a market security and its risk, measured by beta, within the Capital Asset Pricing Model (CAPM).

Market Portfolio

A theoretical bundle of investments that includes every type of asset available in the market, with each asset weighted by its total market capitalization.