The short-term interest rate is 5%. A person buys stock at $34 and sells it at the same price four months later. Ignoring commissions, this person
A) broke even.
B) lost money.
C) incurred an opportunity cost.
D) incurred an opportunity gain.

Question

Quizplus · Accepted Answer

By choosing to invest in stock rather than an alternative that yields a 5% short-term interest rate, the person missed out on potential earnings from that interest, thus incurring an opportunity cost.

The Short-Term Interest Rate Is 5