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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
Suppose your wealthy aunt has given you a gift of $25,000. You have come up with three options for spending (or investing) the money. First, you’d like (but do not need) a new car to brighten up your home and social life. Second, you can invest the money in a high-tech firm’s common stock. It is expected to increase in value by 20% per year, but this option is fairly risky. Third, you can put the money into a three-year certificate of deposit with a local bank and earn 6% per year. There is little risk in the third option.
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a. If you decide to purchase the new car, what is the opportunity cost of this choice? Explain your reasoning.
b. If you invest in the high-tech common stock, what is the opportunity cost of this choice? Explain your reasoning.
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