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.

Question

Quizplus · Accepted Answer

The rate of return on the market portfolio is often used as an estimate of the opportunity cost of capital for projects with an "average" level of risk. This is because the market portfolio is considered to represent the average risk in the market, making it a suitable benchmark for such projects.

An Estimation of the Opportunity Cost of Capital for Projects