Which of the Following Best Describes the Term Opportunity Cost

question 55

Multiple Choice

Which of the following best describes the term opportunity cost?

• A) The cost incurred to qualify for an investment opportunity
• B) The benefit that is given up when choosing one out of a series of options
• C) The benefits of an investment which has come available suddenly
• D) The opportunity to invest in certain cash flows and returns

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Definitions:

Main Effect

The overall impact of an independent variable on a dependent variable in a factorial design, disregarding interactions.

Rule Of 72

A simple formula used to estimate the number of years required to double the invested money at a given annual rate of return, by dividing 72 by the expected rate of interest.

Compounding

Compounding refers to the process by which the value of an investment increases because the earnings on an investment, both capital gains, and interest, earn interest as time passes.

Compounded Monthly

A process where interest earned on an investment is calculated and added to the principal each month, thereby earning interest in subsequent months.