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 25% per year and a hot new IT stock that is estimated to return 30% 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.)
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 25% per year and a hot new IT stock that is estimated to return 30% 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.)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
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 25% per year and a hot new IT stock
that is estimated to return 30% the first year. If you
let your colleague have another month, what is the
your answer in dollar and percentage amounts.)
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