3. Suppose a high schools graduate earns $40,000 per year while a college graduate makes $80,000. Assume these wages will not change over time, and there are no other benefits to going to college. Explicit costs of going to college (tuition, books, supplies, etc.) are $30,000 per year. Ignore the psychic costs. The college education lasts four years. The retirement age is 65. a. Say an 18 year-old decides to obtain college education. What can her annual discount rate be? b. Say a 40 year-old has a discount rate of 5%. Will this person go to college?

3. Suppose a high schools graduate earns $40,000 per year while a college graduate makes $80,000. Assume these wages will not change over time, and there are no other benefits to going to college. Explicit costs of going to college (tuition, books, supplies, etc.) are $30,000 per year. Ignore the psychic costs. The college education lasts four years. The retirement age is 65. a. Say an 18 year-old decides to obtain college education. What can her annual discount rate be? b. Say a 40 year-old has a discount rate of 5%. Will this person go to college?

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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Suppose that, at age 30, you might wish to leave your job and pursue a master’s degree. If you choose to remain at your job, your employer would pay you $74k per year until retirement, at age 55. If you go back to the university, you would have to sacrifice 2 years of income, but once you graduate, you would receive $117k per year until you retire at age 55. The master’s program you are interested in costs $22k per year. Note: The term “k” is used to represent thousands (× $1,000). Required: At an opportunity cost of 8%, determine the percentage difference between your most and least profitable alternatives, with the least profitable option as the basis for your calculation.Answer% Intermediate calculations must be rounded to 3 decimal places (at least). Input your answer as a percent rounded to 2 decimal places (for example: 28.31%).
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.
If the price of attending Big Benefits University is $8,000 a year for tuition, fees, books, and and $25,000 in foregone earnings, what is the marginal cost of attending, if it takes you 5 years to graduate, and you assume a 3% annual inflation rate? If the average college graduate makes $38,000 more every year than the average high school graduate, what is the cumulative marginal benefit of a college education if the average college graduate works for 40 years, assuming a 3% inflation rate? c.In this scenario does it make sense to go to college, explain your answer.
You have a job in a company that pays you P350,000 per year. For a better future, you want to get a Master's degree that could cost P100,000 but cannot continue your job while studying. If you decide to give up your job and return to school to earn a Master's degree, how much would be your opportunity cost?
A. What is an agency relationship? What are agency problems and how do they come about? What are agency costs? B. You estimate that you will need about $60,000 to send your chlld to college In five years. You have about $25,000 now. If you can earn 20 percent per year, wll you make it? At what rate will you just reach your goal? Please please answer that please early please please answer
Suppose that you decide to go to summer school. Your tuition cost is $3,000, books and supplies cost $300, and room and board cost $1,000. You would not work while you attend summer school. If you did not go to summer school you would take a summer job which earns you $5,000 for the summer and your cost of room and board in the summer would be $2,000. Considering only this information, what is the dollar value of your total opportunity cost of attending summer school?
Jenny Jenks has researched the financial pros and cons of entering into a 1-year MBA program at her state university. The tuition and needed books for a master's program will have an upfront cost of $51,000. If she enrolls in an MBA program, Jenny will quit her current job, which pays $50,000 per year after taxes (for simplicity, treat any lost earnings as part of the upfront cost). On average, a person with an MBA degree earns an extra $21,000 per year (after taxes) over a business career of 39 years. Jenny believes that her opportunity cost of capital is 5.3%. Given herestimates, find the net present value (NPV) of entering this MBA program. Are the benefits of further education worth the associated costs? The net present value (NPV) of entering this MBA program is Are the benefits of further education worth the associated costs?
1) In a few short years, you will graduate and enter the workforce. Let us suppose that you and a friend both start working at the age of 23 and decide on very different ways to fund your eventual retirement. In this exercise, we explore these decisions. Neither of you have any savings (P = 0), plan to retire at age 66, and expect to earn 8.4% annual interest, compounded monthly, on all your investments. a) Having taken this class, you decide to start immediately, investing $120 per month. How much money will be in your account in 20 years? b) At this point (you are now 43 years old), you will stop making monthly deposits into your account. Now, the amount you calculated in part (a) will accumulate interest for 23 years (until you are 66 years old). How much is in your account now? Indicoob selled pham
Assume that you have just turned 21, are graduating from college, and are planning for your retirement; at age 55. You currently have no money saved, but plan to make significant investments into a retirement account now that you have gotten a high-paying job. Because of moving and additional expenses associated with the start of your new job, you believe that you will only be able to invest $2,000 on your 22nd and 23rd birthdays (2 payments). You then expect to invest $10,000 each year on your 24th through your 30th birthdays (7 payments), $20,000 each year on your 31st through 40th birthdays (10 payments), and $30,000 each year on your 41st through 55th birthdays (15 payments). During this 34-year period you are willing to take some investment risks and you believe that your investment account can earn a nominal annual rate of return of 9 percent, compounded monthly. At age 55 you plan to retire and will use the money in your investment account to buy a 40-year, guaranteed annuity…
A client needs assistance with retirement planning. Here are the facts: The client, Dave, is 21 years old. He wants to retire at 65. Dave has disposable income of $2,000 per month. The IRA Dave has chosen has an average annual return of 8%. Question 1. If Dave contributes half of his disposable income to the account, what will it be worth at 65? Question 2. How much would he need to contribute to have $5,000,000 at 65?
Answer the following problems and explain it step by step: 1. A man who is 30 years old at the start of the year, is considering getting an MFM degree. He currently earns $40,000 per year and expects to continue earning that amount for the rest of his working life (until age 65). He will give up his income for two years and will pay $20,000 per year in tuition, if he attends business school. In exchange, he expects a raise in his salary after completing his MFM. Assume that the post-graduation salary grows at a 5% annual rate and that the discount rate is 8%. What is the minimum expected starting salary after graduation for him that makes attending business school a positive-NPV investment? (Assuming that all cash flows happen at the end of each year.) 2. Bob and Rose are both 62 years old and plan to retire in 3 years. They will receive $5,000 per month after taxes from pension plans and $1,000 per month after taxes from Social Security after retirement. Regrettably, their living…
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.

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