# Question: 1 How should Vicki look at the opportunity costs of

1. How should Vicki look at the opportunity costs of her M.B.A. degree? Explain.
2. Suppose that when Vicki registers at the university, she learns that she can pay a flat tuition of \$3,000 a semester and take up to 15 credit hours (but no more). Or she can elect simply to pay \$250 per credit hour and take as many hours as she wants each semester. Assuming it takes 60 hours to graduate, and also assuming she could handle 20 hours a semester without threatening her grades, what is the marginal cost of the second option—that is, paying \$250 per credit hour? What might be the opportunity costs of the first option? Explain.
3. What advice can you give Lou with respect to financial planning? Touch on specific topics in your answer.
Lou Pirella and Vicki Wright are taking a course in computer science. They have been good friends for some time, and each will graduate at the end of the current term. Lou is going directly into the workforce, and Vicki plans to earn an M.B.A. degree at a university near her hometown. She is trying to convince Lou to join her, but he feels four years of college is enough—at least for a while.
Lou and Vicki have been talking quite a bit about their plans after graduation. Vicki is relying on her M.B.A. to earn a good income in the future. She also plans to invest, but only in very secure investments. Lou plans to take a more aggressive approach to investing, and he told Vicki he will probably earn considerably more than she each year. Lou has opened an account at a stock brokerage firm and plans to begin investing as soon as he can. Neither Lou nor Vicki currently has life insurance or very much money in checking and savings accounts. Moreover, neither has given much thought to future housing needs. Both have fairly sizable outstanding student loan amounts and Lou has a credit card balance of \$5,300 on which he makes monthly payments. He knows he pays interest on unpaid balances, but he isn’t sure of the interest rate.

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• CreatedMarch 19, 2015
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