5.4 In 2012, the Clarkson Community Schools in Clarkson, Michigan, paid starting teachers $38,087 if they had a bachelor’s degree and $41,802 if they had a master’s degree. (For simplicity, assume that these salaries stay constant and do not increase with experience.) Suppose you know that you want to work for this school district and want to maximize your life-time earnings. To get a master’s degree takes one extra year of schooling and costs

$20,000. Should you get the master’s if you cannot work during that year? Should you get your master’s degree if you can work while studying?

In your calculations, assume that you’ll work for 40 years and then retire and consider interest rates of 3% and 10%. (Hint: You can get a reasonable approximation to the answer by assuming that you work forever and use Equation 16.4.)