Which concept refers to gains you could have attained by choosing a different investment?

• A. Liquidity Risk
• B. Opportunity Cost
• C. Authorized Stock
• D. Ex-Dividend Date

Answer: (B)

Opportunity cost is the gain you forgo by choosing one investment over another. In investing, it captures the return you would have earned if you had selected the next-best alternative instead of the option you chose. This concept helps you compare choices and understand the real cost of a decision in dollars or percentage terms. For example, if the alternative investment would have returned 7% but you chose something that returned 4%, your opportunity cost is the 3% you missed on your invested amount. This focuses on foregone gains rather than the actual risk or fees involved.

Liquidity risk is about how quickly you can convert assets to cash without a big loss. Authorized stock refers to the maximum number of shares a company is allowed to issue. The ex-dividend date is the date after which a stock trades without the upcoming dividend, affecting dividend eligibility but not the foregone gains from choosing between investments.