Amy is an 18 years old high-school graduate and she is trying to decide whether between three career choices:
0 Option A: Start working today. She will start working today at an initial salary of $45,000 and her salary will grow by 1% every year. She will retire at age 68 after working for 50 years. (She will receive 50 paychecks starting from today.) 0 Option B: Go to college and start working after four years. She will pay $40,000 per year for the next 4 years. Tuition is paid at the beginning of each year. (The rst tuition payment is due today.) She will then graduate after four years and start working with an initial salary of $65,000 at age 22. Her salary will grow by 1.5% every year. She will work for 46 years and retire when she is 68 years old (She will receive 46 paychecks.) 0 Option I: Go to college for four years and then go to law school for three years and start working after seven years. She will pay $40,000 per year for college and $70,000 per year for law school for three years. Tuition is paid at the beginning of each year. When she graduates from law school she will start working with an initial salary of $75,000 at age 25. Her salary will grow by 2% every year. She will work for 43 years and retire when she is 68 years old (She will receive 43 paychecks.) The table summarizes her three alternatives. NO COLLEGE (A) COLLEGE (B) COLLEGE+LAW SCHOOL (C) 18 to 22 years old Work Attend College Attend College+Law School (4 years) No tuition Tuition: $40,000 per year Tuition $40,000 per year Initial salary: $45,000 No salary No salary 1% annual wage growth 22 to 25 years old Start Working Law School (3 years) Continue working Initial salary: $65,000 Tuition:$70,000 per year 1% annual wage growth 1.5% annual wage growth No salary 25 to 68 years old Continue Working Continue Working Start Working (43 years) 1% annual wage growth 1.5% annual wage growth Initial salary of $75,000 2% annual wage growth Retirement Retire after 50 years of work Retire after 46 years of work Retire after 43 years of work Early retirement Retire after 42 years of work Retire after 38 years of work Retire after 35 years of work The interest rate is 3% and both tuition and wages are paid at the beginning of each year. Hint: Recall that for any number 0