Question
Joanne has just completed high school and is trying to determine whether to go to junior college for two years or go directly to work.
Joanne has just completed high school and is trying to determine whether to go to junior college for two years or go directly to work. Her objective is to maximize the savings she will have in the bank five years from now.
If she goes directly to work, she will earn $19,000 per year for each of the next five years. If she goes to junior college, for each of the next two years she will earn nothingindeed, she will have to borrow $6,000 each year to cover tuition and books. This loan must be repaid in full three years after graduation. If she graduates from junior college, in each of the subsequent three years, her wages will be $36,000 per year. Joanne's total living expenses and taxes, excluding tuition and books, equal $15,000 per year.
Instructions:Enter your responses as whole numbers.
a.Suppose, for simplicity, that Joanne can borrow and lend at 0 percent interest.On purely economic grounds, should she go to junior college or work?
After 5 years,the total value of Joanne's savings would be $if she goes directly to work and $if she goes to junior college. So, Joanneshould go to(Click to select)junior collegework.
b.Does your answer to part a change if Joanne can earn $22,000 per year with only a high school degree?
(Click to select)NoYes.Joanne should go to(Click to select)workjunior college, since the total value of Joanne's savings would be $if she goes directly to work and $if she goes to junior college.
c.What if Joanne's tuition and books cost $8,000 per year?
Joanne should go to(Click to select)workjunior college, since the total value of Joanne's savings would be $if she goes directly to work and $if she goes to junior college.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered 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