A recent college graduate has the choice of buying a new car for $30 000 or investing the money for four years with a 5% 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)$30 000.
B)$6000.
C)$1500.
D)zero,since there is no opportunity cost for this decision.

Question

Quizplus · Accepted Answer

The opportunity cost is the foregone return from the investment. For four years at 5%, the investment would grow to $36,576. Therefore, the opportunity cost of buying the car is $6,576 ($36,576 - $30,000). Choice B is the closest answer.

A Recent College Graduate Has the Choice of Buying a New