Question

In: Economics

4.​A family is deciding whether to send the oldest child to college. The family expects that...


4.​A family is deciding whether to send the oldest child to college. The family expects that the college education will mean 1.6 times more income per year than if the child does not go to college. College will cost $100,000 (assume that all costs occur in one year). If the income of someone not going to college is $30,000 per year, how long would it take for the $100,000 investment to be paid back in extra earnings, assuming an interest rate of 5 percent? (12 points)
Answer:

Solutions

Expert Solution

Income without college = $30,000

Income after college = 1.6 × 30,000 = $ 48,000

Extra earning = 48,000 - 30,000 = $ 18,000

Investment (Fees) = $ 100,000

Interest rate = 5%

The given case can be expressed mathematically as follows

Talking log on both sides we get

Therefore in 6.67 year the amount will be recovered from the extra earning.

Please contact if having any query will be obliged to you for your generous support. Your help mean a lot to me, please help. Thank you.

Rahul Sunny answered 7 months ago
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