Suppose the best investment you could make with $100,000 in cash is to purchase a government bond that pays 14 percent interest per year. If you decide to invest the money in your own business instead of buying the government bond, the opportunity cost of this financial capital is

Question

Quizplus · Accepted Answer

The opportunity cost of investing in your own business rather than buying the government bond is the interest that could have been earned by investing in the bond. Therefore, the opportunity cost is $14,000 per year (14% of $100,000).

Suppose the Best Investment You Could Make with $100,000 in Cash