The Concept of Opportunity Cost

question 5

Multiple Choice

The concept of opportunity cost

• A) is relevant only to economics.
• B) can be applied to the analysis of any decision-making process.
• C) applies to consumers but not to firms.
• D) refers only to actual payments and incomes.

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Definitions:

Conversion Ratio

In finance, it is the number of shares a holder can obtain by converting a convertible security into common stock.

Market Conversion Value

The value of a convertible security if it is converted into a specified number of shares of common stock, based on the current market price.

Par Value

The nominal or face value of a bond, stock, or coupon as stated by the issuer, which does not necessarily reflect its market value.

Credit Default Swap

A financial derivative allowing an investor to "swap" or offset the risk of credit loss from the default of a borrower.