Opportunity cost is the cost of forgoing the next best alternative when making a decision. The annual opportunity cost of a checking account requiring a [tex]$700 minimum balance at a 1% interest rate is $[/tex]7.
Opportunity cost is the cost of forgoing the next best alternative when making a decision. In this case, the annual opportunity cost of a checking account that requires a [tex]$700 minimum balance to avoid service charges can be calculated based on the interest rate.
To find the opportunity cost, you would multiply the minimum balance required ($[/tex]700) by the interest rate (1 percent). Therefore, the annual opportunity cost would be [tex]$700 * 0.01 = $[/tex]7.
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