Which of the following statements is FALSE?
A) The opportunity cost of capital is the best available expected return offered in the market on an investment of comparable risk and term of the cash flows being discounted.
B) Interest rates we observe in the market will vary based on quoting conventions, the term of investment, and risk.
C) The opportunity cost of capital is the return the investor forgoes when the investor takes on a new investment.
D) For a risk-free project, the opportunity cost of capital will typically be greater than the interest rate of U.S. Treasury securities with a similar term.

Question

Quizplus · Accepted Answer

For a risk-free project, the opportunity cost of capital should be equal to the interest rate of U.S. Treasury securities with a similar term, not greater than it. Therefore, statement D is false. Statements A, B, and C are all true.

Which of the Following Statements Is FALSE