Opportunity costs with type of investment


Problem:

Choose an asset you would like to purchase in 5 years. Calculate how much you need to save for the next five years to purchase this asset using the following website:

http://www.proteam-corvette.com/1967.html.

Base the interest rate on the five year interest rate from the Treasury department:

http://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield

- Calculate the required yearly savings.

- Based on the answer from above, what does this say about your feelings of the time value of money?

- How much money could be made using the same interest rate with the amount of yearly cash flows which would have been saved for the investment if these amounts had been invested instead?

- Is this a good use of the funds? Explain your answer.

- What are the associated opportunity costs with this type of investment? Explain your answer.

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Finance Basics: Opportunity costs with type of investment
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