Consider the following scenarios, each of which span 34 years. If you go to university, you spend

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Consider the following scenarios, each of which span 34 years. If you go to university, you spend \(€ 25,000\) per year for four years on school-related expenses (for example, tuition and books) and then earn \(€ 50,000\) per year for 8 years, \(€ 80,000\) per year for 15 years, and \(€ 70,000\) per year for your remaining 7 years before retirement. If you don't go to university, you earn \(€ 30,000\) per year for 12 years, \(€ 45,000\) per year for 15 years, and \(€ 40,000\) per year for your remaining 7 years before retirement. If the interest rate is zero, should you go to college? If the internal rate of return is \(9.7 \%\), should you go to college if the interest rate is \(10 \%\) ? Comparing your two answers, state a simple rule for determining whether you should go to college. Assume that all payments are made at the end of each year.

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Microeconomics

ISBN: 9781292215624

8th Global Edition

Authors: Jeffrey Perloff

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