The Term Opportunity Cost Refers to the

question 60

Multiple Choice

The term opportunity cost refers to the

• A)value of what is gained when a choice is made.
• B)difference between the value of what is gained and the value of what is forgone when a choice is made.
• C)value of what is forgone when a choice is made.
• D)direct costs involved in making a choice.

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Definitions:

Hedger

An investor or trader who enters into contracts to protect against future price fluctuations of an asset.

Call Option

A Call Option is a financial contract that gives the holder the right, but not the obligation, to buy a specific amount of an asset at a predetermined price within a specified period.

Put Option

A financial deal that provides the holder the privilege, yet not the compulsion, to offload a specified quantity of a basic asset at a fixed rate within an established timeframe.

Underlying Asset

The financial instrument (such as stocks, bonds, commodities) upon which derivatives and other financial instruments are based.