EDUCATION 2. Assume that you are deciding whether to acquire a four-year university degree. Your only consideration at this moment is the degree as an investment for yourself. Costs per year are tuition fees of $600 and books at $100. The government also pays to the university an equivalent amount to your tuition fees to cover the real cost. If you didn't go to university, you could earn $6,000 per year as an acrobat. With a university degree, however, you know that you can earn $10,000 per year as an acrobat. Because of the nature of your chosen occupation, your time horizon for the investment decision is exactly 10 years after university; that is, if the investment is to be worthwhile, it must be so within a 10-year period after graduation. The market rate of interest is 5 percent. Would you make the investment in a degree?
EDUCATION 2. Assume that you are deciding whether to acquire a four-year university degree. Your only consideration at this moment is the degree as an investment for yourself. Costs per year are tuition fees of $600 and books at $100. The government also pays to the university an equivalent amount to your tuition fees to cover the real cost. If you didn't go to university, you could earn $6,000 per year as an acrobat. With a university degree, however, you know that you can earn $10,000 per year as an acrobat. Because of the nature of your chosen occupation, your time horizon for the investment decision is exactly 10 years after university; that is, if the investment is to be worthwhile, it must be so within a 10-year period after graduation. The market rate of interest is 5 percent. Would you make the investment in a degree?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:EDUCATION
2. Assume that you are deciding whether to acquire a four-year university degree. Your only
consideration at this moment is the degree as an investment for yourself. Costs per year are
tuition fees of $600 and books at $100. The government also pays to the university an
equivalent amount to your tuition fees to cover the real cost. If you didn't go to university, you
could earn $6,000 per year as an acrobat. With a university degree, however, you know that
you can earn $10,000 per year as an acrobat. Because of the nature of your chosen
occupation, your time horizon for the investment decision is exactly 10 years after university;
that is, if the investment is to be worthwhile, it must be so within a 10-year period after
graduation. The market rate of interest is 5 percent. Would you make the investment in a
degree?
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