Two years ago, Harold inherited $30,000 and decided to open a coffee shop in his hometown instead of buying stock in Ford Motor Company. The rate of return he could have earned on his investment in Ford stock represents his

Question

Quizplus · Accepted Answer

The opportunity cost of funds refers to the return that could have been earned on the next best alternative investment. In this case, the next best alternative investment was investing in Ford stock, so the rate of return he could have earned on the stock represents his opportunity cost of funds.

Two Years Ago, Harold Inherited $30,000 and Decided to Open