1. Cost of money

Everyone uses money, and it is important to understand what factors affect the cost of money.

Consider the following scenario:

Your accountant has convinced you that you should invest your bonus from this year into your retirement account-instead of buying a

new sports car-because of the high expected return on the investment.

Determine which of these fundamental factors is affecting the cost of money in the scenario described:

O Inflation

O Time preferences for consumption

O Risk