Suppose an Individual Can Earn 3 Percent Interest on an Annual

question 58

Multiple Choice

Suppose an individual can earn 3 percent interest on an annual term deposit.His opportunity cost of holding $100,000 in cash instead of investing in the term deposit will be:

• A)$3,300.
• B)$330.
• C)$1,000.
• D)$6,000.
• E)$3,000.

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Definitions:

Wall Street Journal

A leading financial and business news newspaper known for its comprehensive coverage of economic and market developments.

Marginal Tax Bracket

The tax rate that applies to the last dollar of the taxpayer's income, indicating the percentage of tax applied to your income for each tax bracket in which you qualify.

Equivalent Taxable Yield

The pretax yield on a taxable bond providing an after-tax yield equal to the rate on a tax-exempt municipal bond.