Question

If a checking account has an interest rate of 1% and a government bond has an interest rate of 2%, the opportunity cost of holding the checking account as money is:

Answer 1

the opportunity cost of holding the checking account as money is 1%

Step-by-step explanation:

The computation of the opportunity cost of holding the checking account as money is shown below:

= Interest rate on the government bond - interest rate on checking account

= 2% - 1%

= 1%

Hence, the opportunity cost of holding the checking account as money is 1%

We simply applied the given formula so that the correct percentage could come