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The opportunity cost of holding money is measured by the foregone return
What are the dangers of holding money as an asset?
The opportunity cost of holding money is the interest on an alternative asset that is forfeited. The opportunity cost of holding money, which is represented by the nominal interest rate, is equal to the real interest rate on an alternative asset plus the expected inflation rate, which is the rate at which money loses its purchasing value.
How is a dollar's opportunity cost determined?
Opportunity cost is calculated as follows using the formula below: Return on the Most Profitable Investment minus Return on Investment Pursued is used to determine opportunity cost.
How Does Opportunity Cost Work?
Opportunity costs are the possible advantages that a person, investor, or company forgoes while deciding between two options. Opportunity costs are by definition invisible, making it simple to ignore them.
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