If a chequing account has an interest rate of 1% and a Treasury bill has an interest rate of 3%,the opportunity cost of holding cash in a chequing account is:

Question

Quizplus · Accepted Answer

The opportunity cost of holding cash in a chequing account is the interest rate of the next best alternative investment option, which is the Treasury bill with an interest rate of 3%. Therefore, the difference between the 3% interest rate of the Treasury bill and the 1% interest rate of the chequing account is the opportunity cost, which is 2%. Hence, the best choice is D.

If a Chequing Account Has an Interest Rate of 1