Opportunity Cost: Formula, Examples, and How to Calculate It
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Key terms
- Opportunity CostThe value of the next best alternative foregone when making a decision. For example, money spent on a vacation could have been invested to earn returns.
- Dollar-Cost AveragingAn investment strategy where you invest a fixed amount regularly, regardless of market conditions. Reduces the impact of market volatility by buying more shares when prices are low.
- Cost BasisThe original purchase price of an asset, used to calculate capital gains or losses for tax purposes. Adjusted for stock splits, dividends, and return of capital.
- Equal Credit Opportunity Act (ECOA)A federal law that prohibits lenders from discriminating against credit applicants based on race, color, religion, national origin, sex, marital status, age, or receipt of public assistance. Under the ECOA, lenders must evaluate applications based on creditworthiness factors like income, debts, and credit history. If your application is denied, the lender is required to provide a specific reason for the denial.
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