When a student graduating from high school is considering whether to continue with post-secondary education, they may consider that it gives them higher paying jobs in the future, but requires that they don't begin working until after graduation.

Consider the simplified example where a student has perfectly forecastable employment and is given two choices:

Begin working immediately and make 40,000 a year until they retire 40 years later.

Pay 5,000 a year for the next 4 years to attend university, then get a job paying 50,000 a year until they retire 40 years after making the college attendance decision.

Should the student enroll in school if the discount rate is r = 0.05?

Answer rating: 100% (QA)

Option 1 Begin working immediately and make 40000 a year until ... View the full answer