- CFA Exams
- CFA Level I Exam
- Topic 2. Economics
- Learning Module 1. The Firm and Market Structures
- Subject 2. Economic Profit vs. Accounting Profit
CFA Practice Question
Robert withdrew $100,000 from an account that paid 10 percent annual interest and used the funds to purchase real estate. After one year he sold the property for $120,000. According to an economist, Robert's profit on this deal was ______.
A. $120,000
B. $20,000
C. $10,000
Explanation: The opportunity cost of $10,000 (foregone interest) must be included to determine economic profit.
User Contributed Comments 1
| User | Comment |
|---|---|
| choas69 | oh shyt so according to economist means the economic profit which is profit minus explicit and implicit costs 120(profit) - 100(explicit cost) - 10(frogone interest - emplicit cost) = 10 iam surprised at my mistakes.! |