Question - Mu Ying has recently received a $25000 inheritance from her father. She has considered three possible uses for the money, in no particular order of preference:
(a) Invest it in a Registered retirement Savings Plan (RRSP)
(b) Purchase a new car
(c) Use it toward a down payment on a new condominium
(i) What is Mu Ying's accounting cost and opportunity cost if she decides to purchase the new car?
(ii) Suppose once again that Mu Ying decides to purchase the car. But she reveals that she prefers the down payment on the condo to the RRSP. What is her opportunity cost of purchasing the car in this case? Explain.
(iii) Is it possible for Mu Ying's opportunity cost of purchasing the car to be both the RRSP and the condo? Explain.
(iv) Is there a trade-off between current spending and future spending in this problems? Explain.