3. Suppose a high schools graduate earns $40,000 per year while a college graduate makes $80,000. Assume these wages will not change over time, and there are no other benefits to going to college. Explicit costs of going to college (tuition, books, supplies, etc.) are $30,000 per year. Ignore the psychic costs. The college education lasts four years. The retirement age is 65. a. Say an 18 year-old decides to obtain college education. What can her annual discount rate be? b. Say a 40 year-old has a discount rate of 5%. Will this person go to college?
3. Suppose a high schools graduate earns $40,000 per year while a college graduate makes $80,000. Assume these wages will not change over time, and there are no other benefits to going to college. Explicit costs of going to college (tuition, books, supplies, etc.) are $30,000 per year. Ignore the psychic costs. The college education lasts four years. The retirement age is 65. a. Say an 18 year-old decides to obtain college education. What can her annual discount rate be? b. Say a 40 year-old has a discount rate of 5%. Will this person go to college?
Chapter5: The Time Value Of Money
Section: Chapter Questions
Problem 33P
Related questions
Question
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps with 6 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
Excel Applications for Accounting Principles
Accounting
ISBN:
9781111581565
Author:
Gaylord N. Smith
Publisher:
Cengage Learning
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
Pfin (with Mindtap, 1 Term Printed Access Card) (…
Finance
ISBN:
9780357033609
Author:
Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher:
Cengage Learning