If a checking account has an interest rate of 1% and a Treasury bill has an interest rate of 2%, the opportunity cost of holding the checking account as money is:
A) zero.
B) 0.02%.
C) 1%.
D) 2%.

Question

Quizplus · Accepted Answer

The opportunity cost of holding the checking account instead of investing in the Treasury bill is the difference in interest rates, which is 1% (2% from the Treasury bill minus 1% from the checking account).

If a Checking Account Has an Interest Rate of 1