Which Item Is NOT an Example of a Sunk Cost

question 115

Multiple Choice

Which item is NOT an example of a sunk cost?

• A)materials needed for production
• B)purchase cost of machinery
• C)depreciation
• D)all are sunk costs

---

Definitions:

Liquidity Premium (LP)

Additional return that investors demand for holding an asset that is not easily convertible to cash without a loss in value.

Real Risk-free Rate

The return on an investment with no risk of financial loss, adjusted for inflation.

Inflation Premium

The part of the nominal interest rate that represents compensation to the lender for the loss of purchasing power due to inflation.

Maturity Risk Premium

The additional return that investors demand for holding a bond until its maturity due to the potential for a change in the value over time.