Question
Going to your school has total additional and opportunity costs of $30,000 this year and up-front. With 90% probability, you are likely to graduate from
Going to your school has total additional and opportunity costs of $30,000 this year and up-front. With 90% probability, you are likely to graduate from your school. If you do not graduate, you have lost the entire sum. Graduating from the school will increase your 40-year lifetime annual salary by roughly $5,000 per year, but more so if the stock market rate of return is high than when it is low. For argument's sake, assume that your extra-income beta is 1.5. Assume the risk-free rate is 3%, the equity premium is 5%. What is the value of your education?
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