Zach has decided to start his own photography studio.To purchase the necessary equipment,Zach withdrew $10,000 from his savings account,which was earning 3% interest,and borrowed an additional $5,000 from the bank at an interest rate of 8%.What is Zach's annual opportunity cost of the financial capital that has been invested in the business?

Question

Quizplus · Accepted Answer

Zach's opportunity cost includes the interest he would have earned on his savings ($10,000 at 3% = $300) and the interest he has to pay on the loan ($5,000 at 8% = $400). The total opportunity cost is $300 + $400 = $700.

Zach Has Decided to Start His Own Photography Studio