Suppose You Can Earn 5 Percent on Your Savings Account

question 24

Multiple Choice

Suppose you can earn 5 percent on your savings account if you deposit $500 in it. The opportunity cost of holding the $500 is

• A) $25.
• B) $100.
• C) $495.
• D) $525.
• E) $125.

---

Definitions:

Diminishing Returns

A principle stating that if one factor of production is increased while others are held constant, the additional output will eventually decrease.

Biodegradable Plastic

A type of plastic that decomposes naturally by the action of living organisms, such as bacteria, making it environmentally friendly.

Agricultural Produce

Products that are grown and harvested from farming activities, including crops, fruits, vegetables, and livestock products.

Yield to Maturity

The total expected return on a bond if it is held until the date it matures, accounting for its current market price, par value, coupon interest rate, and time to maturity.