Question

In: Economics

Last month, you lent a work colleague $5000 to cover some overdue bills. He agreed to...

Last month, you lent a work colleague $5000 to cover some overdue bills. He agreed to pay you in 1 month with interest at 2% for the month, thus owing you $5100. Today, when the repayment is due, he asked you to extend the loan for another month and he would pay you the $5100 next month. In the meantime, you have had the offer to invest as much as you wish in an oil-well venture that is expected to pay 22% per year and a hot new IT stock that is estimated to return 48% the first year. If you let your colleague have another month, what is the opportunity cost of your decision? (Note: Express your answer in dollar and percentage amounts.)

The opportunity cost is $  .

The opportunity cost in percentage is  %.

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Expert Solution

Rahul Sunny answered 1 year ago
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