A college graduate earns about $1,500 per month more than someone that only has a high...

A college graduate earns about $1,500 per month more than someone that only has a high school diploma. If a “working life” starts next month and lasts 45 years, how much is a college degree worth today if market interest rates are 3.91% APR, compounded monthly?

Solutions

Expert Solution

Given,

Monthly earning = $1500

Number of years = 45 years

APR = 3.91% or 0.0391

Solution :-

Monthly rate (r) = 0.0391/12 = 0.0032583333

Number of months (n) = 45 years x 12 = 540

Now,

Present value = monthly earning/r x [1 - (1 + r)^-n]

= $1500/0.0032583333 x [1 - (1 + 0.0032583333)^-540]

= $1500/0.0032583333 x [1 - (1.0032583333)^-540]

= $1500/0.0032583333 x [1 - 0.17262396294]

= $1500/0.0032583333 x 0.82737603706 = $380889.23

So, college degree worth today is $380889.23

jeff jeffy answered 2 years ago

Next > < Previous

Related Solutions

The probability that an individual without a college education earns more than $100,000 is 0.2, whereas...

The probability that an individual without a college education earns more than $100,000 is 0.2, whereas the probability that a person with a B.S. or higher degree earns more than $100,000 is 0.6. The probability that a person chosen at random has a B.S. degree is 0.5. What is the probability that a person has at least a B.S. degree if it is known that he or she earns more than $100,000? (Round your answer to four decimal places.)

1. If your salary is $ 1,500 per month and you save $ 500 per month,...

1. If your salary is $ 1,500 per month and you save $ 500 per month, your savings rate is 2. How much money should you invest today at 8% interest to get it to grow to $ 15,000 years? 3. What annual interest rate will make $ 500 increase to $ 1,948 in 12 years? 10 years

Pedro earned a degree from an elite college last year, and now he earns more than...

Pedro earned a degree from an elite college last year, and now he earns more than his friend Juan, who obtained a degree from a public college. Describe two alternative economic theories that explain this phenomenon.

Jon Morgan is in a financial position where he owes more than he earns each month....

Jon Morgan is in a financial position where he owes more than he earns each month. Due to his lack of financial planning and a heavy debt load, Jon started missing payments and saw his credit rating plunge. Unless corrective action is taken, personal bankruptcy will follow. Jon recently contacted his lawyer in order to set up a wage earner plan with his creditors and establish a debt repayment schedule that is workable in light of his personal income. His...

Shirley, a recent college graduate, excitedly described to her older sister the $1,500 sofa, table, and...

Shirley, a recent college graduate, excitedly described to her older sister the $1,500 sofa, table, and chairs she found today. However, when asked she could not tell her sister which interest calculation method was to be used on her credit-based purchase. Calculate the monthly payments and total cost for a bank loan assuming aone-year repayment period and 14 percent interest. Now, assume the store uses the add-on method of interest calculation. Calculate the monthly payment and total cost with a...

Vera is an impoverished graduate student who has only $100 a month to spend on food.

Vera is an impoverished graduate student who has only $100 a month to spend on food. She has read in a government publication that she can assure an adequate diet by eating only peanut butter and carrots in the Öxed ratio of 2 pounds of peanut butter to 1 pound of carrots, so she decides to limit her diet to that regime.a) If peanut butter costs $4 per pound and carrots cost $2 per pound, how much can she eat...

Youcurrently pay $950 per month in rent and would not be comfortablepaying more than...

You currently pay $950 per month in rent and would not be comfortable paying more than this for housing. How much money could you borrow to buy a house, assuming a 30-year loan term and a prevailing annual interest rate of 4.65%?

Francisco Company has 20 employees, each of whom earns $2,900 per month and is paid on...

Francisco Company has 20 employees, each of whom earns $2,900 per month and is paid on the last day of each month. All 20 have been employed continuously at this amount since January 1. On March 1, the following accounts and balances exist in its general ledger: FICA—Social Security Taxes Payable, $7,192; FICA—Medicare Taxes Payable, $1,682. (The balances of these accounts represent total liabilities for both the employer's and employees' FICA taxes for the February payroll only.) Employees' Federal Income...

For 2018, John earns $3,000 per month and has three dependent children. He is divorced and...

For 2018, John earns $3,000 per month and has three dependent children. He is divorced and claims five allowances on his Form W-4. Calculate John's withholding using: (1) percentage method and (2) wage bracket method. Do not round your intermediate computations. Round your final answer to two decimal places. Click here to access the withholding tables. Table for Allowances Amount per Circular E. Pay period 2018 Allowance Amount Weekly $ 79.80 Biweekly 159.60 Semimonthly 172.90 Monthly 345.80 Quarterly 1,037.50 Semiannually...

According to the College Board, undergraduate students spend on average more than $1000 per year on...

According to the College Board, undergraduate students spend on average more than $1000 per year on textbooks.* As a college student, you've suffered the high prices of textbooks, and you're going to do something about it! Let's say that after you graduate, you decide to start your own textbook publishing company. You will need to find a way to appeal to both professors and students with high quality and reasonably-priced products, but you've also got to make a profit. Feel...

Subjects