Question

45 multiple choice 2 points
what is an opportunity cost?
a) the total amount of money spent
b) the benefit of the next best alternative when a decision is made
c) the amount of money saved
d) the amount of money earned
a
b
c
d
46 multiple choice 2 points
why is it important to start investing early?
a) to decrease net worth
b) to miss out on investment opportunities
c) to take advantage of compound interest and maximize returns over time
d) to ignore financial planning
a
b
c
d

Explanation:

• Question 45:
• Opportunity cost is defined as the benefit of the next best alternative when a decision is made.
• Option A refers to total money spent, which is not opportunity cost.
• Option C is about money saved, not relevant to the concept.
• Option D is money earned, also not the definition of opportunity cost.
• Question 46:
• Starting to invest early allows one to take advantage of compound interest. Compound interest means that interest is earned on both the initial principal and the accumulated interest from previous periods, which can maximize returns over time.
• Option A is incorrect as investing early is not to decrease net worth.
• Option B is wrong because starting early is not to miss out on opportunities.
• Option D is incorrect as ignoring financial planning is not a reason for early investing.

Answer:

1. B. The benefit of the next best alternative when a decision is made
2. C. To take advantage of compound interest and maximize returns over time