A Business Is Considering a Cash Outlay of $500,000 for the Purchase

question 75

Multiple Choice

A business is considering a cash outlay of $500,000 for the purchase of land, which it could lease for $40,000 per year.If alternative investments are available that yield a 21% return, the opportunity cost of the purchase of the land is:

• A) $105,000.
• B) $40,000.
• C) $65,000.
• D) $8,400.

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Definitions:

Required Reserve Ratio

The fraction of deposits that a bank is required by regulation to hold in reserve and not lend out, aiming to ensure bank liquidity and stability.

Money Supply

The total amount of monetary assets available in an economy at any specific time, including cash, coins, and balances held in checking and savings accounts.

Required Reserve Ratio

is the fraction of deposits that banks are required to keep on hand as reserves, rather than loaning them out.

Money Supply

The total amount of money available in an economy, including cash, coins, and balances held in checking and savings accounts.