Elinore Is Asked to Invest $5 000 in a Friend's

question 55

Multiple Choice

Elinore is asked to invest $5 000 in a friend's business with the promise that the friend will repay $5 500 in one year's time. Elinore finds her best alternative to this investment, with similar risk, is one that will pay her $5 400 in one year's time. Government securities of similar term offer a rate of return of 6%. What is the opportunity cost of capital in this case?

• A)6%
• B)9%
• C)10%
• D)8%

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Definitions:

Grammatical Rules

A set of guidelines in a language that dictate how words and phrases should be arranged to convey clear meaning.

Pathological Societies

Societies characterized by pervasive social problems and dysfunctions that impede collective welfare and individual well-being.

Labor

Human effort, either physical or mental, applied in the production of goods and services.

Repressive Law

A type of law in traditional societies, as described by Durkheim, that focuses on punishing offenders to maintain collective order rather than rehabilitating them.