QuestionJune 14, 2025

Frederick wants to redo his kitchen but also wants to save money for retirement. His retirement account is expected to earn 5% interest every year and redoing his kitchen would cost 15,000 What is the opportunity cost for choosing to save the money for retirement? (1 point) 5% of the initial 15,000 in the first year, plus 5% of the new total in that account in the second year, plus 5% more in the third year,and so on until he withdraws the money 15,000 5% the benefit he would get from redoing his kitchen

Frederick wants to redo his kitchen but also wants to save money for retirement. His retirement account is expected to earn 5% interest every year and redoing his kitchen would cost 15,000 What is the opportunity cost for choosing to save the money for retirement? (1 point) 5% of the initial 15,000 in the first year, plus 5% of the new total in that account in the second year, plus 5% more in the third year,and so on until he withdraws the money 15,000 5% the benefit he would get from redoing his kitchen
Frederick wants to redo his kitchen but also wants to save money for retirement. His retirement account is expected to earn 5% interest every year and redoing his kitchen would cost 15,000 What is the opportunity cost for choosing to save the money for retirement? (1 point) 5% of the initial 15,000 in the first year, plus 5% of the new total in that account in the second year, plus 5% more in the third year,and so on until he withdraws the money 15,000 5% the benefit he would get from redoing his kitchen

Solution
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Answer

The opportunity cost is the accumulated interest from saving the money for retirement. Explanation 1. Define Opportunity Cost Opportunity cost is the benefit foregone by choosing one option over another. 2. Calculate Interest Earned in First Year **Interest = Principal \times Rate**. For the first year, 15,000 \times 0.05 = 750. 3. Calculate Total After First Year Total after first year = Initial amount + Interest = 15,000 + 750 = 15,750. 4. Repeat for Subsequent Years Continue calculating interest on the new total each year using the formula: **Interest = Principal \times Rate**. 5. Determine Opportunity Cost The opportunity cost is the accumulated interest earned over the years if he saves instead of spending.

Explanation

1. Define Opportunity Cost<br /> Opportunity cost is the benefit foregone by choosing one option over another.<br /><br />2. Calculate Interest Earned in First Year<br /> **Interest = Principal \times Rate**. For the first year, $15,000 \times 0.05 = 750$.<br /><br />3. Calculate Total After First Year<br /> Total after first year = Initial amount + Interest = $15,000 + 750 = 15,750$.<br /><br />4. Repeat for Subsequent Years<br /> Continue calculating interest on the new total each year using the formula: **Interest = Principal \times Rate**.<br /><br />5. Determine Opportunity Cost<br /> The opportunity cost is the accumulated interest earned over the years if he saves instead of spending.
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