You decide to lend $100 to a friend interest free for one year. You calculate that you could have earned 10% interest. What is the opportunity cost of the loan if it is paid on time?

Question

Quizplus · Accepted Answer

The opportunity cost of the loan is the amount of money you could have earned if you had invested the money instead. In this case, the opportunity cost is the 10% interest you could have earned on the $100, which is $10. Therefore, the correct answer is A) $10.

You Decide to Lend $100 to a Friend Interest Free