1. (35) Suppose that you are a 17 year old student deciding whether or not to attend university a year from now. You may work from ages 18 to 65, and without a college degree you can earn $30,000 per year. Assume that there are no taxes and that the interest rate is r=0.05. (a) (5) Calculate the present value of your lifetime earnings if you do not attend university, (b) (5) Suppose that your university tuition would cost $50.000 per year, and that you cannot work while in school, but that with a degree you can earn $50,000 per year after graduation. What is the payback period on an investment in a college education, and is it worthwhile by the payback rule? (c) (5) What is the net present value of going to college, and is it worthwhile by this metric? (d) (10) Suppose now that the benefits of a college education are uncertain, and that upon graduation, rather than being guaranteed $50,000 per year, you will either find a job that pays $60,000 with probability p or one that pays $40,000 per year with probability 1 - p. Letting p denote the probability of finding the higher paying job, and assuming that you are risk neutral, how high must p be for you to attend college? (e) (10) Now suppose that you are risk averse, with a utility function (W) = 1 - c. How high must the probability p of finding a high paying job be for you to attend college? w