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Explain Why the Interest Rate Is the Opportunity Cost of Holding

question 171

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Explain why the interest rate is the opportunity cost of holding currency. What is the benefit of holding currency?


Definitions:

Investment

The allocation of resources, usually money, with the expectation of generating an income or profit.

Profit

The financial gain achieved when the total revenues generated from business activities exceed the total costs and expenses incurred.

Market Value

The ongoing price for the transaction of assets or services within the marketplace.

Interest Rate

The percentage of a sum of money charged for its use, often expressed as an annual percentage rate.

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