Suppose the Best Investment You Could Make with $100,000 in Cash

question 302

Multiple Choice

Suppose the best investment you could make with $100,000 in cash is to purchase a government bond that pays 14 percent interest per year. If you decide to invest the money in your own business instead of buying the government bond, the opportunity cost of this financial capital is

• A) $1,400 per year.
• B) $100,000 per year.
• C) $14,000 per year.
• D) zero, because you already had the $100,000.

---

Definitions:

Retained Earnings

Profits that a company has elected to keep at the end of a fiscal period instead of distributing to shareholders as dividends, often used for reinvestment.

Incremental Adjustment

A modification made to accounts or values in small stages, often used for accounting adjustments or to refine estimates.

Investee

An entity in which an investor holds an interest, and typically has significant influence over, but does not control.

Investor

An individual or institution that allocates capital with the expectation of receiving financial returns, encompassing a broad range of investment strategies and vehicles.