Suppose a Mechanic Uses $150,000 of His Own Money to Start

Multiple Choice

Suppose a mechanic uses $150,000 of his own money to start a business. The rate of interest he could earn in a savings account is 5 percent, and the rate of interest he could earn by investing in bonds is 8 percent. What is the opportunity cost of capital when the mechanic uses his money to start his own business?

A) $8,000/year
B) $7,500/year
C) $150,000
D) $12,000/year
E) $19,500/year