Elinore Is Asked to Invest $5100 in a Friend's Business

question 15

Multiple Choice

Elinore is asked to invest $5100 in a friend's business with the promise that the friend will repay $5610 in one year. Elinore finds her best alternative to this investment, with similar risk, is one that will pay her $5508 in one year. U.S. securities of similar term offer a rate of return of 7%. What is the opportunity cost of capital in this case?

• A) 7%
• B) 8%
• C) 9%
• D) 10%

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Definitions:

Psychoanalytic Theory

A theory developed by Sigmund Freud that emphasizes the influence of unconscious motivations and conflicts on behavior.

Natural Observation

A research method in which subjects are observed in their natural environment without any manipulation by the researcher.

Dream Interpretation

The process of assigning meaning to dreams, often seen in psychoanalysis as a way to uncover underlying thoughts and feelings.

Analytic Introspection

A method in psychology where individuals closely analyze their own thoughts and emotions to gain insight.