Question Details

	Username: Andrew Rating: Asked to: Talitha Taslim Date Created: 03 Mar 2016
Category	28
Tag	Financial
Question	What does opportunity cost mean?

Advice from Guru

Hi Andrew,

The difference in return between a chosen investment and one that is necessarily passed up. Say you invest in a stock and it returns a paltry 2% over the year. In placing your money in the stock, you gave up the opportunity of another investment - say, a risk-free government bond yielding 6%. In this situation, your opportunity costs are 4% (6% - 2%).

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