Your Parents Have Given You a New Car on Your

question 40

Multiple Choice

Your parents have given you a new car on your 16^th birthday for which they paid about $24,000. Assume this is also the price you would get if you decided to sell the car a month after getting it. The monthly costs of driving the car are $100 for oil changes and $200 for gas. What are the opportunity costs of driving the car this month?

• A)$300
• B)$2,000
• C)$24,300
• D)$0

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Definitions:

Market Risk Premium

The additional return expected by investors for taking on the risk of investing in the stock market over a risk-free asset.

Stock Beta

A measure of a stock's volatility in comparison to the overall market. A beta higher than 1 implies greater volatility.

Risk-free Interest Rate

The theoretical return of an investment with no risk of financial loss, typically represented by government bonds.

Portfolio Beta

An indicator of the level of systematic risk or volatility in a portfolio relative to the overall market.