Suppose that the interest rate available to you on a long-term bond is 4 percent. If you hold $1,000 of your wealth in currency instead of in the form of a bond, the annual opportunity cost is
A) $0.04.
B) $4.
C) $40.
D) $400.

Question

Quizplus · Accepted Answer

The opportunity cost of holding $1,000 in currency instead of investing it in a bond that yields 4 percent interest per year is $40. This is calculated as 4% of $1,000, which equals $40.

Suppose That the Interest Rate Available to You on a Long-Term