The Opportunity Cost of Capital for a Safe Investment Is

question 26

Multiple Choice

The opportunity cost of capital for a safe investment is:

• A)The rate of return on U.S.Treasury notes.
• B)The expected rate of return on the stock market.
• C)The interest rate that the firm pays on a loan from a bank or insurance company.
• D)The interest rate that the firm receives on its checking account.

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Definitions:

Disposable Income

The sum of money households can spend or save after deducting income taxes.

Capital Expenditure

Funds used by a company to acquire or upgrade physical assets such as property, industrial buildings, or equipment, intended to improve long-term performance.

Allocating Resources

The process of distributing available resources, such as time, money, and manpower, among various projects or business units to achieve strategic goals.

Rolling Budget

A continuously updated budget that extends a set period into the future by adding a new period as the most recent period is completed.