Tom Is a Castaway Who Washes Up on a Remote

question 207

Multiple Choice

Tom is a castaway who washes up on a remote island. He can kill eight birds per hour or catch ten fish per day. The natives on the island can kill ten birds per day or catch twenty fish per day. The natives have a comparative advantage in:

• A)​hunting birds.
• B)​fishing.
• C)​both hunting birds and fishing
• D)​neither hunting birds or fishing.

Understand the concept of systematic and unsystematic risk and their implications for portfolio management.

Understand and calculate the covariance and correlation between securities.

Comprehend the impact of diversification on portfolio risk.

Analyze the separation property and its implications for investment decisions.

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Definitions:

Promissory Note

A financial document in which one party promises to pay a certain sum of money to another party under agreed terms.

Promissory Note

A financial instrument that contains a written promise by one party to pay another party a definite sum of money either on demand or at a specified future date.

Dishonored

Refers to a financial instrument, such as a check or promissory note, that has not been paid upon presentation because of insufficient funds or other reasons.

Interest Revenue

Income received from investments in bonds, loans, or other interest-bearing instruments, representing the compensation for lending funds or capital.