Question

Suppose that you have received $300 as a birthday gift. You can spend it today or you can put themoney in a bankaccount for a year and earn 5 percent interest. The opportunity cost of spending themoney today, in terms of whatyou could have after one year, isa. $0.b. $15.c. $305.d. $315

Answer 1

Answer:

d. $315

Explanation:

The computation of the opportunity cost after one year is shown below:

= Received amount as a birthday gift + Received amount as a birthday gift × rate of interest

= $300 + $300 × 5%

= $300 + $15

= $315

We simply considering the received amount and the rate of interest which is increased to find the opportunity cost after one year