Reading 5: The Time Value of Money

LOS a: Interpret interest rates as required rate of return, discount rate, or opportunity cost.

1、Wei Zhang has funds on deposit with Iron Range bank. The funds are currently earning 6% interest. If he withdraws $15,000 to purchase an automobile, the 6% interest rate can be best thought of as a(n):

A)   discount rate.

B)   required rate of return.

C)   financing cost.

D)   opportunity cost.

The correct answer was D)

Since Wei will be foregoing interest on the withdrawn funds, the 6% interest can be best characterized as an opportunity cost — the return he foregoes by postponing his auto purchase until the future.

[此贴子已经被作者于2008-1-17 16:57:19编辑过]