Considering the overall plot we are very likely looking at a late medieval one here. In such times murder to acquire riches would have been quite plausible, and the various tricks used to distract the knight and reverse the situation are the main point of the piece of fiction. They vary in plausibility and ingenuity. There is no more suspension of disbelief needed here than with a hundred other ballads, to my mind anyway. The talking parrot helps set the tone but that's only in English versions. Other talking birds do come in at various points in continental versions.