A recent college graduate has the choice of buying a new car for $33,500 or investing the money for four years with an 8% expected annual rate of return.He has an investment of $40,000 in equities and bonds which yields 6% expected annual rate of return.If the graduate decides to purchase the car,the best estimate of the opportunity cost of that decision is ________.
A) $2,400
B) $10,720
C) $40,000
D) $9,600

Question

Quizplus · Accepted Answer

The opportunity cost is the potential earnings from investing the $33,500 at an 8% annual return for four years, which is approximately $10,720.

A Recent College Graduate Has the Choice of Buying a New