Hermione received an inheritance of $1 million. She decided to use the money to
ID: 1246791 • Letter: H
Question
Hermione received an inheritance of $1 million. She decided to use the money to purchase a small magical potions business in HogsHamlet, United Kingdom. If Hermione had invested the $1 million in a risk free bond fund she could have made $50,000 each year. She also quit her job with LuckyCharms Inc. where she was earning an annual salary of $75,000 to devote all of her time to her new business. At the end of the first year of operating her new business, Hermione's accountant reported an accounting profit of $100,000. What was Hermione's economic profit/loss? A.Explanation / Answer
Hermione received an inheritance of $1 million. She decided to use the money to purchase a small magical potions business in HogsHamlet, United Kingdom. If Hermione had invested the $1 million in a risk free bond fund she could have made $50,000 each year. She also quit her job with LuckyCharms Inc. where she was earning an annual salary of $75,000 to devote all of her time to her new business. At the end of the first year of operating her new business, Hermione's accountant reported an accounting profit of $100,000. What was Hermione's economic profit/loss?
A. $25,000 profit
B. $50,000 profit
C. $25,000 loss
D. $50,000 loss