Doug wants to start up his own business, and needs $25,000 to get it off the ground. He can either withdraw it from his savings account, where he currently earns 3 percent, or he can take out a loan for $25,000 and pay 5 percent interest. Doug should compare:
A. the explicit cost of $750 to the implicit cost of $1,250 and choose to use his savings.
B. the explicit cost of $25,750 to the explicit cost of $26,250 and choose to borrow the money.
C. the implicit cost of $750 to the explicit cost of $1,250 and choose to borrow the money.
D. the implicit cost of $750 to the explicit cost of $1,250 and choose to use his savings.
Answer: D
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