QUESTION 12 You are using your new knowledge from this class to estimate the present value of net benefits from earning a bachelor's degree versus an associate's degree. According to the New York Fed, on average those with a bachelor's degree earn $64,500 per year. On average, obtaining a bachelor's degree costs $122,000 (for simplicity assume an immediate one-time cost). On average those with an associate's degree earn $50,000 per year. On average, obtaining an associate's degree costs $43,700 (again for simplicity assume an immediate one-time cost). Assume you will work for 40 years before retiring. What is the present value extra net benefits from obtaining a bachelor's degree vs. an associate's degree? Assume a 5% interest rate, and since the earnings are already on average over your working life, also assume no growth in earnings. Lastly, for simplicity, do your calculation assuming that you will work forever, not just 40 years. Oa. Approximately $212,000. Ob. Approximately $980,000. Oc. Aproximately $200,000, thus an associate's degree has higher present value net benefits. Od. Approximately zero dollars thus present value returns from a bachelor's degree and an associate's degree are about equal. QUESTION 13 A contractor informs Sage that insulating the attic, which will cost $1,000, will save $250 per year in home energy bills. Sage knows he will own the house forever and pass it on within his family. Yet Sage chooses not to insulate the attic. Which statement is true? Oa. Either Sage does not understand basic benefit-cost analysis, or Sage is irrationally using a discount rate greater than or equal to 25%. Ob. Sage understands basic benefit-cost analysis, and he has rightly concluded that the present value of net benefits of the project is negative, even for reasonable discount rates like 7% or less. Oc. Sage understands basic benefit-cost analysis, and he has rightly concluded that the present value of net benefits of the project is negative since he would have to borrow the $1,000 from the bank at an interest rate of 8%. O d. Sage understands basic benefit-cost analysis, and he has rightly concluded that the present value of net benefits of the project is negative since all of the costs incur immediately.