For a Given Benefit, a Rational Person Chooses the Option

question 55

Multiple Choice

For a given benefit, a rational person chooses the option that has:

• A) the lowest opportunity cost.
• B) the highest opportunity cost.
• C) the average opportunity cost.
• D) no opportunity cost.

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Definitions:

Convertible Bonds

Bonds that can be converted into a predetermined amount of the issuing company's shares, usually at the discretion of the bondholder.

Par Value

The face value or nominal value of a stock or bond, set by the issuing company.

Credit Derivatives

Financial instruments used to manage exposure to credit risk by transferring it from one party to another without transferring the underlying assets.

Recovery Value

The estimated amount that can be reclaimed from an asset at the end of its useful life.