Question
Using the information below, calculate the opportunity cost of choosing one option over the other (i.e. cash vs balanced) and state which one is favourable):
Using the information below, calculate the opportunity cost of choosing one option over the other (i.e. cash vs balanced) and state which one is favourable):
Cash option
Investment: 100% in deposits with Australian deposit taking institution
Risk: Very low
Return: 2.7% pa
Value of investing $200,000 after 10 years: $254,000
Return in 10 years: $54,000
Balanced option
Investment: 70% in shares and property and the rest in cash or fixed interest
Risk: Medium
Return: 4.8% pa
Value of investing $200,000 after 10 years: $296,000
Return in 10 years: $94,000
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Economics of Money, Banking and Financial Markets
Authors: Frederic S. Mishkin
9th Edition
978-0321607751, 9780321599797, 321607759, 0321599799, 978-0321598905
