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Consider the imaginary country of Studentaria, a developing country where people live for four "years" and everyone must make decisions regarding their education. During age 1, everyone goes to primary school. At age 2, they can decide whether to go to secondary school or go to work. At age 3, if they went to secondary school they can decide whether to go to college or go to work. At age 4 everybody works. This translates into three alternative lifetime earnings options, summarized in the table below: Lifetime Earning Options (Studentaria $) Options Age 1 Age 2 Age 3 Age 4 A. Primary 400 600 800 school B. Secondary 1200 1700 School 4000 C. College (1) Consider Susan, a secondary school graduate who must decide whether to invest in a college education or enter the job market. College costs $800, but the government pays for a part of it, so that the cost to Susan is only $500. What is the private rate of return to investing in a college education for Susan? (Remember that Susan makes her decision at age 3)

Consider the imaginary country of Studentaria, a developing country where people live for four "years" and everyone must make decisions regarding their education. During age 1, everyone goes to primary school. At age 2, they can decide whether to go to secondary school or go to work. At age 3, if they went to secondary school they can decide whether to go to college or go to work. At age 4 everybody works. This translates into three alternative lifetime earnings options, summarized in the table below: Lifetime Earning Options (Studentaria $) Options Age 1 Age 2 Age 3 Age 4 A. Primary 400 600 800 school B. Secondary 1200 1700 School 4000 C. College (1) Consider Susan, a secondary school graduate who must decide whether to invest in a college education or enter the job market. College costs $800, but the government pays for a part of it, so that the cost to Susan is only $500. What is the private rate of return to investing in a college education for Susan? (Remember that Susan makes her decision at age 3)

Essentials Of Investments
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
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Consider the imaginary country of Studentaria, a developing country where people live for four "years" and everyone must make decisions regarding their education. During age 1. everyone goes to primary school. At age 2, they can decide whether to go to secondary school or go to work. At age 3, if they went to secondary school they can decide whether to go to college or go to work. At age 4 everybody works. This translates into three alternative lifetime earnings options, summarized in the table below: Lifetime Earning Options (Studentaria $) Options Age 1 Age 2 Age 3 Age 4 A. Primary 400 600 800 school B. Secondary 1200 1700 School 4000 C. College (1) Consider Susan, a secondary school graduate who must decide whether to invest in a college education or enter the job market. College costs $800, but the government pays for a part of it, so that the cost to Susan is only $500. What is the private rate of return to investing in a college education for Susan? (Remember that Susan makes her decision at age 3)
Transcribed Image Text:Consider the imaginary country of Studentaria, a developing country where people live for four "years" and everyone must make decisions regarding their education. During age 1. everyone goes to primary school. At age 2, they can decide whether to go to secondary school or go to work. At age 3, if they went to secondary school they can decide whether to go to college or go to work. At age 4 everybody works. This translates into three alternative lifetime earnings options, summarized in the table below: Lifetime Earning Options (Studentaria $) Options Age 1 Age 2 Age 3 Age 4 A. Primary 400 600 800 school B. Secondary 1200 1700 School 4000 C. College (1) Consider Susan, a secondary school graduate who must decide whether to invest in a college education or enter the job market. College costs $800, but the government pays for a part of it, so that the cost to Susan is only $500. What is the private rate of return to investing in a college education for Susan? (Remember that Susan makes her decision at age 3)
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