To calculate the estimated opportunity cost:
\[ \text{Opportunity Cost} = \text{Return on Best Foregone Option} - \text{Return on Chosen Option} \]
Opportunity cost represents the potential benefits that an individual, investor, or business misses out on when choosing one alternative over another. It is important for making informed decisions.
Let's assume the following values:
Using the formula:
\[ \text{Opportunity Cost} = 10\% - 8\% = 2\% \]
The estimated opportunity cost is 2%.
Let's assume the following values:
Using the formula:
\[ \text{Opportunity Cost} = 15\% - 12\% = 3\% \]
The estimated opportunity cost is 3%.