Suppose that you lend $1,000 to a friend and he or she pays you back one year later. What is the opportunity cost of lending the money?
A)There is no cost.
B)The real interest rate that would have been earned on the money.
C)The nominal interest rate that would have been earned on the money.
D)The implicit cost of the money.

Question

Quizplus · Accepted Answer

The opportunity cost of lending the money is the real interest rate that would have been earned on the money if it had been invested in a risk-free asset, such as a government bond.

Suppose That You Lend $1,000 to a Friend and He