2.From the College Scorecard, average annual cost of attending UCR is $12,344. Average salary for UCR attendees is $49,700 (using past data based on tax data instead of surveys).

Average salary of someone who does not attend college is roughly $30,500. Suppose everyone retires at age 65, everyone leaves high school at age 18, and college lasts 4 years.

a.(2 points) What is the present discounted value of working immediately instead of going to college if the discount rate is 0.05 (R=1/(1.05))? What is the present discounted value of going to UCR? Financially speaking, is going to UCR a good deal (assuming you would be continuously working and no wage growth)? Hint: 1+R+R²+...+R⁴⁶=(1-R⁴⁷)/(1-R). 1+R+R²+R³=(1-R⁴)/(1-R). R⁴+R⁵+...+R⁴⁶=(R⁴-R⁴⁷)/(1-R).

b.(2 points) What is the present discounted value of working immediately instead of going to college if the discount rate is 0.1 (R=1/(1.1))? What is the present discounted value of going to UCR? Financially speaking, is going to UCR a good deal (assuming you would be continuously working and no wage growth)?

c.Give two reasons why average salary of UCR graduates may be higher than average salary of UCR attendees (2 points)?

d.(2 points) Now suppose you are entering your last year of college. You would have to pay 1 year of tuition and forgo 1 year of salary at $38,200 to complete the degree. If you complete the degree you will earn $52,200. Maintain the high discount rate (R=1/1.1). You anticipate working 44 years if you work instead of going to college (43 years if you don't). Financially speaking, is going to UCR a good deal (assuming you would be continuously working and no wage growth)?