If the market interest rate equals 8 percent,the opportunity cost of the last new investment project undertaken would approximately be equal to _____.
A)zero percent
B)4 percent
C)infinity
D)8 percent
E)16 percent

Question

Quizplus · Accepted Answer

The opportunity cost of the last new investment project undertaken would approximately be equal to the market interest rate of 8 percent. This is because the cost of financing the project would be equal to the market interest rate, and the opportunity cost represents the return that could have been earned on the next best alternative investment. Choosing a rate lower than 8 percent would underestimate the true cost of the investment, and choosing a rate higher than 8 percent would overestimate the cost. Thus, the best choice is D.

If the Market Interest Rate Equals 8 Percent,the Opportunity Cost