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

Question

Quizplus · Accepted Answer

To calculate the opportunity cost, we need to find out how much Dianne would have earned if she had kept her money in the savings account instead of using it for the business.

Interest earned on $10,000 at 3% = $300 
Interest paid on $5,000 at 8% = $400

Therefore, the total opportunity cost is $700 (300 + 400).

Dianne Has Decided to Start Her Own Photography Studio