Sia
Question
Statistics
Posted 8 months ago
Which of the following best describes the opportunity cost of holding money?
Choose 1 answer:
(A) The liquidity of other assets
(B) A bond's face value
(C) Inflation
(D) The risk of other assets
(E) The interest rate
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Answer from Sia
Posted 8 months ago
Solution by Steps
step 1
Identify the concept of opportunity cost in the context of holding money. Opportunity cost refers to the value of the next best alternative that is foregone when making a choice
step 2
Analyze the answer choices in relation to the concept of opportunity cost. Holding money means forgoing the potential earnings from other investments
step 3
Determine which answer choice best represents the foregone earnings from not investing money elsewhere
Answer
E
Key Concept
Opportunity Cost of Holding Money
Explanation
The opportunity cost of holding money is the interest rate that could have been earned on that money if it were invested elsewhere.
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