1. Jackie has just finished high school. She will live for two more periods, and she needs to choose a career path. She can either take a job right now as an Uber driver $28,000 in each of the two periods. Or she can get more education in period one to become an economist. Tuition in the first period would be $25,000 and she would earn $85,000 in the second period with her economics degree. a) Suppose the discount rate is 5% (r=.05). If Jackie wants to maximize the present value of her lifetime income, what should she do? Explain and show your calculations. b) Suppose the discount rate is 10% (r= .10). What should Jackie do? Explain and show your calculations c) Suppose the discount rate is 5% but suppose tuition costs are $30,000. What should Jackie do? Explain and show your calculations.

1. Jackie has just finished high school. She will live for two more periods, and she needs to choose a career path. She can either take a job right now as an Uber driver $28,000 in each of the two periods. Or she can get more education in period one to become an economist. Tuition in the first period would be $25,000 and she would earn $85,000 in the second period with her economics degree. a) Suppose the discount rate is 5% (r=.05). If Jackie wants to maximize the present value of her lifetime income, what should she do? Explain and show your calculations. b) Suppose the discount rate is 10% (r= .10). What should Jackie do? Explain and show your calculations c) Suppose the discount rate is 5% but suppose tuition costs are $30,000. What should Jackie do? Explain and show your calculations.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Mark is trying to decide if he should attend college or not. Part of his decision will be based on the return on investment of college. He estimates costs to attend Texas Tech for 4 years including room and board are $20,000 per year. He also assumes tuition costs will rise by 3.5% per year. How much is a 4-year degree going to cost Mark? $92,183.27 $84,298.86 $7,231,158.87 $1,314,002.83
6) Susan is looking to purchase her first home five years from today. The house costs $1,550,000. She will have to make a down payment of 10% of this amount and plans to take a loan from the bank for the difference. Bank charges are approximately 15% of the loan amount. She plans to start saving from today to cover both the down payment and the bank charges. a. How much will she need to save to cover both the down payment and bank charges? b. If she currently has $195,000 in her account and will make no further deposits over the next five years, what rate of interest must she earn on this account in order to achieve the savings target calculated in part (a) above?
Jan wants to plan for her daughter's education. Her daughter, Rachel was born today and will go to college at age 18 for five years. Tuition is currently $15,000 per year, in today's dollars. Jan anticipates tuition inflation of 6% and believes she can earn an 11% return on her investment. How much must Jan save at the end of each year, if she wants to make her last payment at the beginning of her daughter's first year of college? $4,680.37 $7,334.72 $3,882.03 $2,547.54
Your daughter wants to the University of Cincinnati. She is already planning to start in 10 years (which is when her first tuition payment is due). Her tuition will be $19,886 per year for four years. The relevant discount rate is 8.01 percent per year. You plan to save for her education by setting aside the same amount of money per year for 9 years. What is the amount you need to save per year if you start saving at the end of this year? O $32,914.10 O $5,271.07 $3,657.12 $30,473.20 O $7,316.70
6. Calculating Interest Rates. Assume the total cost of a college education will be $290,000 when your child enters çollege in 18 years. You presently have $35,000 to invest. What annual rate of interest must you earn on your investment to cover the cost of your child's college education?
Vijay
Philip works at a nursing home as an aide and earns $27,000 a year. IF he went to school to get a nursing degree he could earn $50,000 in the first year. Philip knows this but he also knows that tuition and fees at a nearby college could cost about $45,000(total). He can get a student loan for 5% with 10 years to repay the loan. What is the total cost of the student loans?
A) When Liam Corbett was born, his grandparents opened a 529 college savings plan for him so that he had enough money to pay for college once he turned 18. His college education is expected to cost $225,000 on the day he turns 18 years old. Determine if there will be enough in the account given the following assumptions (Show your calculations): Assumption #1: The grandparents contribute $6,200 per year starting the day Liam is born and the account earns an average annual rate of return of 7%. Assumption # 2: The grandparents contribute $5,000 per year starting the day Liam is born and the account earns an average annual rate of return of 7%. Assumption # 3: The grandparents contribute $5,000 per year starting the day Liam is born and the account earns an average annual rate of return of 9%. Assumption #4: The grandparents contribute $8,500 per year starting the day Liam is born and the account earns an average annual rate of return of 4%. Assumption # 5: The grandparents contribute…
If the average college tuition cost is $40,000/year currently to go to college, what will it cost for your children in 2045 for a 4-year degree if the inflation rate is 4% per year until then
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Assume the total cost of a college education will be $350,000 when your child enters college in 15 years. You presently have $67,000 to invest.What annual rate of interest must you earn on your investment to cover the cost of your child’s college education?
The Jeffersons have asked you what would be needed to fund the children’s future college costs. Assume each child will begin college at age 18 and graduate in four years. Assume current costs are $24,000 per year and are expected to increase by 5% per year and investments earn 7%. A. Assuming no existing assets are dedicated to college, what is the annual savings amount required to fund the children’s education? The Jeffersons’ goal is to have an amount at the beginning of the freshman year for each child that is sufficient to fund a serial payment covering the $24,000 of current costs of college adjusted for inflation for each of the four years of college. Please include your calculator keystroke inputs [PV, I/YR, N, FV, and PMT (if needed)] for each step of this calculation. Also include whether any PMTs are in the end mode or the begin mode. B. What would you say to the Jeffersons about their education funding situation? Write a script of a single paragraph as if you…

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