The Appropriate Opportunity Cost of Capital Is the Return That

question 84

Multiple Choice

The appropriate opportunity cost of capital is the return that investors give up on alternative investments with:

• A)The same risk
• B)The risk-free return
• C)The expected return on the TSX 300
• D)The normal, common stock risk premium

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Definitions:

Production Possibility Frontier

A model that illustrates the trade-offs facing an economy that produces only two goods. It shows the maximum quantity of one good that can be produced for any given quantity produced of the other.

Autarky Price

The price of a good or service in a closed economy that does not engage in trade with other economies.

Slope

A measure of how steep a line or curve is. The slope of a line is measured by “rise over run”—the change in the y-variable between two points on the line divided by the change in the x-variable between those same two points.

Absolute Value

The value of a number without regard to a plus or minus sign.