If a Checking Account Has an Interest Rate of 1

question 272

Multiple Choice

If a checking account has an interest rate of 1% and a Treasury bill has an interest rate of 2%, the opportunity cost of holding the checking account as money is:

• A) zero.
• B) 0.02%.
• C) 1%.
• D) 2%.

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Definitions:

Working Capital

The difference between a company's current assets and current liabilities, indicating the liquidity available to run its operations.

Fiscal Year

A twelve-month period used for accounting purposes and financial reporting by businesses, which may not align with the calendar year.

December 31

Commonly used in finance and accounting to signify the end of the fiscal or calendar year.

Unadjusted Trial Balance

A preliminary list of all accounts and their balances used in financial reporting before adjustments are made for accruals and deferrals.