An Estimation of the Opportunity Cost of Capital for Projects

question 79

Multiple Choice

An estimation of the opportunity cost of capital for projects that have an "average" level of risk is the rate of return on:

• A) Treasury bills.
• B) the market portfolio.
• C) the market portfolio minus the rate of return on Treasury bills.
• D)Treasury bonds plus a maturity premium.

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Definitions:

Nitrogen Gas

A diatomic, colorless, odorless, and tasteless gas that makes up about 78% of the Earth's atmosphere.

Food Chain

A linear sequence of organisms through which nutrients and energy pass as one organism eats another.

Top Predator

A top predator, often situated at the apex of a food chain, is an organism that is not preyed upon by any other in its natural environment.

Stored Energy

energy in a system or object that is not being used and can be released to do work; also known as potential energy.