Question

Which of the following statements is​ FALSE? A. For a riskminusfree ​project, the opportunity cost of capital will typically be greater than the interest rate of U.S. Treasury securities with a similar term. 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 best available expected return offered in the market on an investment of comparable risk and term of the cash flows being discounted. D. The opportunity cost of capital is the return the investor forgoes when the investor takes on a new investment.

Answer 1

Answer: 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.

Step-by-step explanation:

The interest rates observed in the market varies based on quoting​ conventions, investment term, and risk. Furthermore, the opportunity cost of capital is the best expected return available that is offered in the market on an investment with comparable risk and the term of the cash flows being discounted while the opportunity cost of capital is the investor return that is forgone when the investor takes on a new investment.

For a risk-free project, the opportunity cost of capital may not be greater than the interest rate of the United States treasury securities with a similar term. So option A is the correct answer.