- A company makes economic profits of 10%. The risk premium for the company’s line of business is 5%. If the banks offer a rate of interest on savings accounts of 3%, the opportunity cost to the owners of the company is:
A 5%.
B 7%.
C 8%.
D 10%.
I thought the opportunity cost is the best alternative forgone, so either 5% or 3%?
May I know how to get the answer C and the calculation if it is used?