. How much is a college education worth? In the text, we supposed a college education raised a person's wage by $30,000 per year, from $40,000 to $70,000. Assume the interest rate is 3% and there is no growth in wages, then answer the following. 1. Suppose you are a high school senior deciding whether or not to go to college. What is the present discounted value of your labor income if you forgo college and start work immediately? 2. As an alternative, you could pay $20,000 per year in college tuition, attend for 4 years, and then earn S70,000 per year after you graduate. What is the present discounted value of your labor earnings under this plan? (Compute this value from the point of view of a high school senior.) 3. Discuss the economic value of a college education.
. How much is a college education worth? In the text, we supposed a college education raised a person's wage by $30,000 per year, from $40,000 to $70,000. Assume the interest rate is 3% and there is no growth in wages, then answer the following. 1. Suppose you are a high school senior deciding whether or not to go to college. What is the present discounted value of your labor income if you forgo college and start work immediately? 2. As an alternative, you could pay $20,000 per year in college tuition, attend for 4 years, and then earn S70,000 per year after you graduate. What is the present discounted value of your labor earnings under this plan? (Compute this value from the point of view of a high school senior.) 3. Discuss the economic value of a college education.
Chapter13: Investment Fundamentals
Section: Chapter Questions
Problem 9LTAI
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Transcribed Image Text:9. How much is a college education worth? In the text, we supposed a college education raised a person's
wage by $30,000 per year, from $40,000 to $70,000. Assume the interest rate is 3% and there is no growth in
wages, then answer the following.
1. Suppose you are a high school senior deciding whether or not to go to college. What is the present
discounted value of your labor income if you forgo college and start work immediately?
2. As an alternative, you could pay $20,000 per year in college tuition, attend for 4 years, and then earn
S70,000 per year after you graduate. What is the present discounted value of your labor earnings under
this plan? (Compute this value from the point of view of a high school senior.)
3. Discuss the economic value of a college education.
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