Question

-What is opportunity cost and what is an example of this from your life?
-Do you think student loans offer an attractive rate for “capital” for students to attend college? Why or why not?
-Do you have student loans? What do you think about the interest rates?
-What affect do the current interest rates, which are in essence determined by The Federal Reserve Bank, have on the cost of capital to firms and consumers?

Answer 1

Answer:

i)Opportunity Cost :

Opportunity cost represents to the advantages of a person , business or a investor misses out while picking one alternative over another.

For example from the life:

The total expense for a MBA course will be around 12 lakhs. On the off chance that we are putting this sum in Bank/any portfolio we will get a good return.So this return a student misses at whatever point he picks his/her MBA course.

ii)

The courses at universities are particularly have high expense. Normally these loans won't made an attractive rate for the students to go to college.So the result is unreasonable.

iii)

I have no student loans .

The interest rate for student loans are as a rule around 10-11%

iv)

One of the Federal Reserve Bank devices for overseeing cash is to change interest rates.

The component or mechanism resembles this :

High interest rates make cash progressively costly and contract the sum of cash available for use or circulation and in banks. Low interest rates make cash more affordable and increase the cash supply.

So it impacts the expense of capital of the firm, since it is the base expected sum that the investors contribute.