Study Guide for Microeconomics
9th Edition
ISBN: 9780134741123
Author: Robert Pindyck, Daniel Rubinfeld
Publisher: PEARSON
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Chapter 15, Problem 7E
To determine
Application of Present value
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Joanne has just completed high school and is trying to determine whether to go to junior college for two years or go directly to work. Her objective is to maximize the savings she will have in the bank five years from now.
If she goes directly to work, she will earn $22,000 per year for each of the next five years. If she goes to junior college, for each of the next two years she will earn nothing—indeed, she will have to borrow $6,000 each year to cover tuition and books. This loan must be repaid in full three years after graduation. If she graduates from junior college, in each of the subsequent three years, her wages will be $41,000 per year. Joanne’s total living expenses and taxes, excluding tuition and books, equal $15,000 per year.
Instructions: Enter your responses as whole numbers.
a. Suppose, for simplicity, that Joanne can borrow and lend at 0 percent interest. On purely economic grounds, should she go to junior college or work?
After 5 years, the total value of…
Joanne has just completed high school and is trying to determine whether to go to junior college for two years or go directly to work. Her objective is to maximize the savings she will have in the bank five years from now.
If she goes directly to work, she will earn $22,000 per year for each of the next five years. If she goes to junior college, for each of the next two years she will earn nothing—indeed, she will have to borrow $6,000 each year to cover tuition and books. This loan must be repaid in full three years after graduation. If she graduates from junior college, in each of the subsequent three years, her wages will be $41,000 per year. Joanne’s total living expenses and taxes, excluding tuition and books, equal $15,000 per year.
Instructions: Enter your responses as whole numbers.
a. Suppose, for simplicity, that Joanne can borrow and lend at 0 percent interest. On purely economic grounds, should she go to junior college or work?
After 5 years, the total value of…
Joanne has just completed high school and is trying to determine whether to go to communtiy college for two years or go directly to work. Her objective is to maximize the savings she will have in the bank five years from now.
If she goes directly to work, she will earn $18,500 per year for each of the next five years. If she goes to community college, for each of the next two years she will earn nothing—indeed, she will have to borrow $6,000 each year to cover tuition and books. This loan must be repaid in full three years after graduation. If she graduates from community college, in each of the subsequent three years, her wages will be $35,000 per year. Joanne’s total living expenses and taxes, excluding tuition and books, equal $15,000 per year.
Joanne should go to (Click to select) work junior college , since the total value of Joanne's savings would be $__ if she goes directly to work and $__ if she goes to community college.
Chapter 15 Solutions
Study Guide for Microeconomics
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