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This question reviews the concept of net present value and investing in education. You can earn up to 4 extra credit points in the quizzes/review
This question reviews the concept of net present value and investing in education. You can earn up to 4 extra credit points in the quizzes/review category for completing this question. I will post a solution later in the weekend. Suppose Shannon is deciding whether or not to do a BA degree. For simplicity we will divide time into three periods for this question. School would take place during period one and the next two periods would be for working. The table below show her earnings for the three periods. Period 1 HS only $20,000 $24,000 $28,000 BA degree $0 $40,000 $60,000 Period 2 Period 3 Also suppose that she has to pay $10,000 in tuition and books in order to go to school. a) Based on the above information, does school seem like a good investment? Explain in words or using a diagram. b) If people start living longer and they can work for a fourth period, what do you expect to happen to the returns to education in this case? Explain briefly. c) So far, we ignored discounting in this problem. If she could get a 10% interest rate from putting money in the bank, calculate the present value of investing in a BA. d) Based on your number in part c, should she choose to do her BA
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