Question: You have an extra $ 1 , 0 0 0 and are faced with a choice: either to save it in a bank account that

You have an extra $

1, 000

and are faced with a choice: either to save it in a bank account that offers a

5 %

annual interest rate or to spend it immediately on goods or experiences. Assume there are no other investment options available and no taxes for simplicity.

)

Calculate the opportunity cost of choosing to spend the $

1, 000

now instead of saving it at

5 %

interest for one year.

You have an extra $ 1 , 0 0 0 and are faced with

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