In the summer of 2008, at Heathrow airport in London, Bestofthebest (BB), a private company, offered a lottery to win a Ferrari or 107,000 British pounds, equivalent at the time to about $214,000. Both the Ferrari and the money, in 100 pound notes, were on display. If the U.K. interest rate was 4 % per year, and the dollar interest rate was 2 % per year (EARs), how much did it cost the company in dollars each month to keep the cash on display? That is, what was the opportunity cost of keeping it on display rather than in a bank account? (Ignore taxes.)
The opportunity cost of keeping it on display rather than in a bank account is pound per month.