Answer to Question #59993 in Other Economics for Steve Bond
Suppose going to college costs 20,000 a year. The average earnings of a highschool graduate are 20,000 a year. By going to college, suppose one can expect to earn 50,000 a year. Set up the expressions for the present value of benefits and costs, and the net present value of a college education if the interest rate is 10%.
How does this change if the interest rate is 15%? Why is the investment in college less attractive when the interest rate is high?