Suppose That Corn Is the Unit of Account in a Certain

question 3

Multiple Choice

Suppose that corn is the unit of account in a certain economy.If a pair of tennis shoes exchanges for two bushels of corn and a pair of hiking boots exchanges for twelve bushels of corn,then

• A)whether or not a double coincidence of wants exists,all trades have to be made using corn
• B)with one pair of tennis shoes,a person will be able to purchase twelve pairs of hiking boots
• C)with one pair of tennis shoes,a person will be able to purchase six pairs of hiking boots
• D)with twelve pairs of tennis shoes,a person will be able to purchase one pair of hiking boots
• E)with six pairs of tennis shoes,a person will be able to purchase one pair of hiking boots

Learning how the geometric average rate of return is calculated and its basis.

Recognizing the importance of observation periods and variance in evaluating portfolio performance.

Identifying the creators and the concept behind the M2 measure.

Understanding the applications and differences between Modigliani’s M2 measure and the Treynor T2 measure.

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Definitions:

Money Market

A segment of the financial market in which financial instruments with high liquidity and very short maturities are traded.

Subsector

A specific part of a larger sector or industry, categorized by similar business activities or products.

Capital Market

A financial market in which long-term debt (over a year) or equity-backed securities are bought and sold.

Federal Reserve Bank

The central banking system of the United States, responsible for setting monetary policy, issuing currency, and overseeing the nation's banking system.