Suppose the best investment you could make with $200,000 in cash is to purchase a government bond that pays 10 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

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The opportunity cost of using the $200,000 in your own business instead of purchasing the government bond that pays 10 percent interest per year is the annual interest income you are giving up, which is $20,000 (10% of $200,000). Therefore, the best choice is to purchase the government bond unless the potential return on investment in your business exceeds $20,000 per year.

Suppose the Best Investment You Could Make with $200,000 in Cash