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Assignment Unit09
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Submitted Apr 20 at 11:02am
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Question 1
0 / 1 pts
Use the information below to answer next 6 questions. For convenience this information will be repeated for each relevant question.
Jack is 25 years old, and he is making a decision about whether to go to school next year for an additional year. He wants to retire when he
is 61. If Jack does not go to school next year, his annual income will be $25,000 next year. If he does go to school next year, the annual
tuition is $5,000 and he will not be earning any income while in school. After schooling, he can work on a job with annual income of
$27,000. Assume his annual income is going to be $2,000 more with this one additional year of education than without this one additional
year of education each year from age 27 when he graduates until he retires at 61, and assume the financial market interest rate is 5%. What is the present value of the total cost of going to school for an additional year for Jack?
Less than $28,535.00 Between $28,535.00 and $28,545.00 Between $28,545.01 and $28,555.00 Between $28,555.01 and $28,565.00 Correct Answer
More than $28,565.00 Answer: (1) PV of total cost = tuition *(1/(1+r))+ opportunity cost* (1/(1+r)) = 5000*(1/(1+5%)) + 25000*(1/(1+5%)) =
28571.43
Unanswered
Question 2
0 / 1 pts
Jack is 25 years old, and he is making a decision about whether to go to school next year for an additional year. He wants to retire when he
is 61. If Jack does not go to school next year, his annual income will be $25,000 next year. If he does go to school next year, the annual
tuition is $5,000 and he will not be earning any income while in school. After schooling, he can work on a job with annual income of
$27,000. Assume his annual income is going to be $2,000 more with this one additional year of education than without this one additional
year of education each year from age 27 when he graduates until he retires at 61, and assume the financial market interest rate is 5%. What is the present value of the total benefit of going to school for an additional year for Jack?
Less than $31,170.00 Between $31,170.00 and $31,180.00 Correct Answer
Between $31,180.01 and $31,190.00 Between $31,190.01 and $31,200.00 More than $31,200.00 Answer: PV of marginal benefits = Present value of all future benefits= 2000 * (1/(1+r)^2+....+ 1/(1+r)^36))= 2000 *
(PVFS(r=5%, n=36) ­1/(1+5%))= 2000*(16.546852­0.952381)=2000*15.594471=31188.94
Unanswered
Question 3
0 / 1 pts
Jack is 25 years old, and he is making a decision about whether to go to school next year for an additional year. He wants to retire when he
is 61. If Jack does not go to school next year, his annual income will be $25,000 next year. If he does go to school next year, the annual
tuition is $5,000 and he will not be earning any income while in school. After schooling, he can work on a job with annual income of
$27,000. Assume his annual income is going to be $2,000 more with this one additional year of education than without this one additional
year of education each year from age 27 when he graduates until he retires at 61, and assume the financial market interest rate is 5%. According to the cost­benefit analysis, from a financial perspective, should Jack go to school for an additional year or not?
Correct Answer
He should. He should not Not enough information to tell Answer: Because PV of benefits PV of costs.
Unanswered
Question 4
0 / 1 pts
Now suppose Jack is 45 years old instead of 25 years old and faces the decision of whether to go to school next year for one year. He
wants to retire when he is 61. If Jack does not go to school next year, his annual income will be $25,000 next year. If he does go to school
next year, the annual tuition is $5,000 and he will not be earning any income while in school. After schooling, he can work on a job with
annual income of $27,000. Assume his annual income is going to be $2,000 more with this one additional year of education than without
this one additional year of education each year from age 47 when he graduates until he retires at 61, and assume the financial market
interest rate is 5%. What is the present value of the total cost of going to school for an additional year for Jack?
Less than $28,535.00 Between $28,535.00 and $28,545.00 Between $28,545.01 and $28,555.00 Between $28,555.01 and $28,565.00 Correct Answer
More than $28,565.00 Answer: (1) PV of total cost = tuition *(1/(1+r))+ opportunity cost* (1/(1+r)) = 5000*(1/(1+5%)) + 25000*(1/(1+5%)) =
28571.43
Unanswered
Question 5
0 / 1 pts
Now suppose Jack is 45 years old instead of 25 years old and faces the decision of whether to go to school next year for one year. He
wants to retire when he is 61. If Jack does not go to school next year, his annual income will be $25,000 next year. If he does go to school
next year, the annual tuition is $5,000 and he will not be earning any income while in school. After schooling, he can work on a job with
annual income of $27,000. Assume his annual income is going to be $2,000 more with this one additional year of education than without
this one additional year of education each year from age 47 when he graduates until he retires at 61, and assume the financial market
interest rate is 5%. What is the present value of the total benefit of going to school for an additional year for Jack?
Correct Answer
Less than $19,775.00 Between $19,775.00 and $19,785.00 Between $19,785.01 and $19,795.00 Between $19,795.01 and $19,805.00 More than $19,805.00 Answer: PV of marginal benefits = Present value of all future benefits= 2000 * (1/(1+r)^2+....+ 1/(1+r)^16))= 2000 *
(PVFS(r=5%, n=16) ­1/(1+5%))= 2000 * (10.837770­0.952381)=2000*9.885389=19770.78
Unanswered
Question 6
0 / 1 pts
Now suppose Jack is 45 years old instead of 25 years old and faces the decision of whether to go to school next year for one year. He
wants to retire when he is 61. If Jack does not go to school next year, his annual income will be $25,000 next year. If he does go to school
next year, the annual tuition is $5,000 and he will not be earning any income while in school. After schooling, he can work on a job with
annual income of $27,000. Assume his annual income is going to be $2,000 more with this one additional year of education than without
this one additional year of education each year from age 47 when he graduates until he retires at 61, and assume the financial market
interest rate is 5%. According to the cost­benefit analysis, from a financial perspective, should Jack go to school for an additional year or not?
He should. Correct Answer
He should not Not enough information to tell Answer: Because PV (benefits) PV (costs)
Unanswered
Question 7
0 / 1 pts
Use the information below to answer next 6 questions. For convenience this information will be repeated for each relevant question.
Tyler is 25 years old, and he is making a decision about whether to go to school next year for an additional year. He wants to retire as soon
as he turns 61. If Tyler does not go to school next year, his annual income will be $25,000 next year. If he does go to school next year, the
annual tuition is $5,000 and he will not be earning any income while in school. After schooling, he can work on a job with annual income of
$27,000. Assume his annual income is going to be $2,000 more with this one additional year of education than without this one additional
year of education each year from age 27 when he graduates until he retires at 61, and assume the financial market interest rate is 8%. What is the present value of the total cost of going to school for an additional year for Tyler?
Less than $27,750.00 Between $27,750.00 and $27,760.00 Between $27,760.01 and $27,770.00 Correct Answer
Between $27,770.01 and $27,780.00 More than $27,780.00 Answer: (1) PV of total cost = tuition *(1/(1+r))+ opportunity cost* (1/(1+r)) = 5000*(1/(1+8%)) + 25000*(1/(1+8%)) =
27777.78
Unanswered
Question 8
0 / 1 pts
Tyler is 25 years old, and he is making a decision about whether to go to school next year for an additional year. He wants to retire as soon
as he turns 61. If Tyler does not go to school next year, his annual income will be $25,000 next year. If he does go to school next year, the
annual tuition is $5,000 and he will not be earning any income while in school. After schooling, he can work on a job with annual income of
$27,000. Assume his annual income is going to be $2,000 more with this one additional year of education than without this one additional
year of education each year from age 27 when he graduates until he retires at 61, and assume the financial market interest rate is 8%. What is the present value of the total benefit of going to school for an additional year for Tyler?
Less than $21,570.00 Between $21,570.00 and $21,580.00 Correct Answer
Between $21,580.01 and $21,590.00 Between $21,590.01 and $21,600.00 More than $21,600.00 Answer: PV of marginal benefits = Present value of all future benefits= 2000 * (1/(1+r)^2+....+ 1/(1+r)^36))= 2000 *
(PVFS(r=8%, n=36) ­1/(1+8%))= 2000*(11.717193­0.925926)=2000*10.791267=21582.53
Unanswered
Question 9
0 / 1 pts
Tyler is 25 years old, and he is making a decision about whether to go to school next year for an additional year. He wants to retire as soon
as he turns 61. If Tyler does not go to school next year, his annual income will be $25,000 next year. If he does go to school next year, the
annual tuition is $5,000 and he will not be earning any income while in school. After schooling, he can work on a job with annual income of
$27,000. Assume his annual income is going to be $2,000 more with this one additional year of education than without this one additional
year of education each year from age 27 when he graduates until he retires at 61, and assume the financial market interest rate is 8%.
According to the cost­benefit analysis, from a financial perspective, should Tyler go to school for an additional year or not?
He should. Correct Answer
He should not Not enough information to tell Answer: Because PV of benefits PV of costs.
Unanswered
Question 10
0 / 1 pts
Now we assume a different financial market interest rate at 4% instead of 8%. Tyler is still 25 years old, and he is making a decision about
whether to go to school next year for an additional year. He wants to retire as soon as he turns 61. If Tyler does not go to school next year,
his annual income will be $25,000 next year. If he does go to school next year, the annual tuition is $8,000 and he will not be earning any
income while in school. After schooling, he can work on a job with annual income of $27,000. Assume his annual income is going to be
$2,000 more with this one additional year of education than without this one additional year of education each year from age 27 when he
graduates until he retires at 61.
What is the present value of the total cost of going to school for an additional year for Tyler?
Less than $31,715.00 Between $31,715.00 and $31,725.00 Correct Answer
Between $31,725.01 and $31,735.00 Between $31,735.01 and $31,745.00 More than $31,745.00 Answer: (1) PV of total cost = tuition *(1/(1+r))+ opportunity cost* (1/(1+r)) = 8000*(1/(1+4%)) + 25000*(1/(1+4%)) =
31730.77
Unanswered
Question 11
0 / 1 pts
Now we assume a different financial market interest rate at 4% instead of 8%. Tyler is still 25 years old, and he is making a decision about
whether to go to school next year for an additional year. He wants to retire as soon as he turns 61. If Tyler does not go to school next year,
his annual income will be $25,000 next year. If he does go to school next year, the annual tuition is $8,000 and he will not be earning any
income while in school. After schooling, he can work on a job with annual income of $27,000. Assume his annual income is going to be
$2,000 more with this one additional year of education than without this one additional year of education each year from age 27 when he
graduates until he retires at 61.
What is the present value of the total benefit of going to school for an additional year for Tyler?
Less than $35,890.00 Correct Answer
Between $35,890.00 and $35,900.00 Between $35,900.01 and $35,910.00 Between $35,910.01 and $35,920.00 More than $35,920.00 Answer: PV of marginal benefits = Present value of all future benefits= 2000 * (1/(1+r)^2+....+ 1/(1+r)^36))= 2000 *
(PVFS(r=4%, n=36) ­1/(1+4%))= 2000*(18.908283­0.961538)=2000*17.946745=35893.49
Unanswered
Question 12
0 / 1 pts
Now we assume a different financial market interest rate at 4% instead of 8%. Tyler is still 25 years old, and he is making a decision about
whether to go to school next year for an additional year. He wants to retire as soon as he turns 61. If Tyler does not go to school next year,
his annual income will be $25,000 next year. If he does go to school next year, the annual tuition is $8,000 and he will not be earning any
income while in school. After schooling, he can work on a job with annual income of $27,000. Assume his annual income is going to be
$2,000 more with this one additional year of education than without this one additional year of education each year from age 27 when he
graduates until he retires at 61.
According to the cost­benefit analysis, from a financial perspective, should Tyler go to school for an additional year or not?
Correct Answer
He should. He should not Not enough information to tell Answer: Because PV (benefits) PV (costs)
Unanswered
Question 13
0 / 1 pts
Use the information below to answer next 3 questions. For convenience this information will be repeated for each relevant question.
Matthew is 30 years old, and he is making a decision about whether to go to school next year for two additional years. He wants to retire as
soon as he turns 65. If Matthew does not go to school for the next two years, his annual income will be $40,000 next year, and $45,000 the
year after. If he does go to school for the next two years, the annual tuition is $10,000 each year and he will not be earning any income
while in school. After schooling, he can work on a job with annual income of $60,000. Assume his annual income is going to be $5,000
more with these two additional years of education than without these two additional years of education each year from age 33 when he
graduates until age 65 when he retires, and assume the financial market interest rate is 6%. What is the present value of the total cost of going to school for two additional years for Matthew?
Less than $96,105.00 Between $96,105.00 and $96,115.00 Correct Answer
Between $96,115.01 and $96,125.00 Between $96,125.01 and $96,135.00 More than $96,135.00 Answer: (1) PV of total cost for year 1 + PV of total cost for year 2= (10,000+40,000)*(1/(1+6%)) + (10,000+45,000)*
(1/(1+6%)^2) = 47169.81+48949.80=96119.61
Unanswered
Question 14
0 / 1 pts
Matthew is 30 years old, and he is making a decision about whether to go to school next year for two additional years. He wants to retire as
soon as he turns 65. If Matthew does not go to school for the next two years, his annual income will be $40,000 next year, and $45,000 the
year after. If he does go to school for the next two years, the annual tuition is $10,000 each year and he will not be earning any income
while in school. After schooling, he can work on a job with annual income of $60,000. Assume his annual income is going to be $5,000
more with these two additional years of education than without these two additional years of education each year from age 33 when he
graduates until age 65 when he retires, and assume the financial market interest rate is 6%. What is the present value of the total benefit of going to school for two additional years for Matthew?
Less than $63,320.00 Correct Answer
Between $63,320.00 and $63,330.00 Between $63,330.01 and $63,340.00 Between $63,340.01 and $63,350.00 More than $63,350.00 Answer: PV of marginal benefits = Present value of all future benefits= 5000 * (1/(1+r)^3+....+ 1/(1+r)^35))= 5000 *
(PVFS(r=6%, n=35) (PVFS(r=6%, n=2))= 5000*(14.498246­1.833393)=5000*12.664853=63324.27
Unanswered
Question 15
0 / 1 pts
Matthew is 30 years old, and he is making a decision about whether to go to school next year for two additional years. He wants to retire as
soon as he turns 65. If Matthew does not go to school for the next two years, his annual income will be $40,000 next year, and $45,000 the
year after. If he does go to school for the next two years, the annual tuition is $10,000 each year and he will not be earning any income
while in school. After schooling, he can work on a job with annual income of $60,000. Assume his annual income is going to be $5,000
more with these two additional years of education than without these two additional years of education each year from age 33 when he
graduates until age 65 when he retires, and assume the financial market interest rate is 6%. According to the cost­benefit analysis, from a financial perspective, should Matthew go to school for two additional years or not?
He should. Correct Answer
He should not Not enough information to tell Answer: Because PV of benefits PV of costs.
Unanswered
Question 16
The increase in U.S. university tuitions ____________ the rate of return on college education.
increases 0 / 1 pts
Correct Answer
decreases does not affect Unanswered
Question 17
0 / 1 pts
The main reason(s) that some people earn more money than others is(are)
differences in worker skills differences in job characteristics differences in worker experiences Correct Answer
all of the above only a and c are true Unanswered
Question 18
Which of the following is NOT considered human capital investment?
formal schooling joining a fitness club Correct Answer
buying stocks migration 0 / 1 pts
Unanswered
Question 19
0 / 1 pts
Regular physician visits in considered a form of human capital investment.
Correct Answer
True False Unanswered
Question 20
0 / 1 pts
Education is considered a form of human capital investment because
one is sure to get a higher salary with more education Correct Answer
one is likely to get a higher salary with more education one is likely to get a lower salary with more education getting more education is sure to be more rewarding than investing in stock market Unanswered
Question 21
The best source of occupational information in the U.S. is the Occupational Outlook Handbook published by
U.S. Consortium of Universities 0 / 1 pts
U.S. Bureau of Commerce Correct Answer
U.S. Bureau of Labor Statistics State governments Unanswered
Question 22
0 / 1 pts
From a financial perspective, human capital investment is worthwhile if
Correct Answer
the alternative financial market investment has a lower rate of return the alternative financial market investment has a higher rate of return the alternative financial market investment return is irrelevant Unanswered
Question 23
0 / 1 pts
For a full­time university student who does not work, tuition cost is usually quite substantial. It is typically the most expensive component
of the cost of human capital investment in a college education.
True Correct Answer
False Unanswered
Question 24
0 / 1 pts
With an interest only mortgage, which of the following statements is NOT true?
Correct Answer
Your loan balance will increase over time. Your interest rate will remain the same over time. Your payment will be lower initially compared to a fixed rate mortgage Your payment will be higher than a comparable fixed­rate mortgage once the interest only period is over. Unanswered
Question 25
0 / 1 pts
The more years you plan to work after you get your education, the ______ the rate of return on your education.
Correct Answer
higher lower the same Unanswered
Question 26
Rate of return on education ___________ the _____________ you are when you get your additional education.
rises, older declines, younger Correct Answer
declines, older 0 / 1 pts
a and b only none of the above Unanswered
Question 27
0 / 1 pts
In evaluating human capital investment in a formal education, which of the following is NOT an important factor in affecting the benefit of
such investment?
salary with education salary without education market interest rate retirement age Correct Answer
All of the above are important factors in affecting the benefit of human capital investment Unanswered
Question 28
0 / 1 pts
In evaluating human capital investment in a formal education, other things equal, the younger you are when you go to school, the less likely
the investment is going to be worthwhile from a financial perspective.
True Correct Answer
False Unanswered
Question 29
0 / 1 pts
In evaluating human capital investment in a formal education, other things equal, the higher the market interest rate, the less likely the
human capital investment is going to be worthwhile from a financial perspective.
Correct Answer
True False Unanswered
Question 30
0 / 1 pts
In evaluating human capital investment in a formal education, other things equal, the higher your current salary without the education, the
more likely the human capital investment is going to be worthwhile from a financial perspective.
True Correct Answer
False Quiz Score: 0 out of 30