Question
From the College Scorecard, average annual cost of attending College is $12,344. Average salary for College attendees is $49,700. Average salary of someone who does
From the College Scorecard, average annual cost of attending College is $12,344. Average salary for College attendees is $49,700. Average salary of someone who does not attend college is roughly $30,500. Suppose we are in a 5-period model (i.e., from age 18 to 22), everyone leaves high school at age 18, and college lasts for 2 years.
a.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))?
b.What is the present discounted value of going to College?
c.Financially speaking, is going to College a good deal (assuming you would be continuously working and no wage growth)?
d.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 College? Financially speaking, is going to College a good deal (assuming you would be continuously working and no wage growth)?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started