You could choose to invest in the stock market at 15% or you can choose to...

You could choose to invest in the stock market at 15% or you can choose to invest in government bonds at 7%. You choose the stock market. What is the opportunity cost of capital?

a. 5%

b. 7%

c. 12%

Solutions

Expert Solution

First let's understand what is opportunity cost of capital

Opportunity cost of capital is the expected return foregone by investing in stock market instead of bond market

We choose to invest in stock market instead of bond market

So opportunity cost is 7%

jeff jeffy answered 2 years ago

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