Question 1, economics, Microeconomics

Assignment Help:
You are considering whether or not to go to graduate school. Well… there are many things to consider, of course, such as the type of job you would thus get, the opportunity to live in a city or town whose existence you might have disregarded entirely otherwise and, most importantly, the sheer and ecstatic joy of learning! (By now, you may be wondering what I am on and where you can get some – search no further than Durian, a pungent fruit available in Chinatowns across NYC). All right, all this is well and good, but there is also a monetary aspect… Financially, would it be a sound decision? Let’s see.

- The graduate program you are looking at lasts four years;
- The school forbids you to work during the time of the program (to leave all your time to studying), but they will give you 10 000$ a year to live on
- The program will allow you to get a job paying 70 000 a year when you get out.
- If you do not go to graduate school (assuming you are just graduating from college), you have a job lined up paying 45 000.
- Your discount rate is 10% (0.1).

a) Is this a good idea financially? That is, does the higher wage when you get out ever compensates for the lower income during grad school? If so, how many years must you work on the job after graduation in order to come up ahead? (don’t forget to discount the future!)
b) What if you have another option: A school that lends you the money, but promises a job at 90 000$ when you get out. Let’s say that the school lends you the 10 000$ a year instead, and that repayment is due whenever you want (say, within 20 years), but as soon as you graduate, the loan starts accruing interest at a rate of 10% a year (so you owe 40 000$ on the day of graduation, 44 000$ the next year if you don’t pay anything, etc.). In this case, how many years do you need at 90 000$ for you to come out ahead? If you do come start coming out ahead after a while, do you do so faster than at the free school?
c) We talked to some extent about the issue of debt peonage in class. Even if you come out ahead eventually with the deal in b), is it constraining in away in terms of life plans? If so how?
d) So far, I have assumed that you have all the information (job-wise, etc.) in advance and that you know the information for certain. Of course, life is not so simple and no job is ever entirely guaranteed… So in this case, on what would you base your decision (keeping it on financial considerations for now)? How solid of a basis do you feel this is? Does taking uncertainty into account change the assessment of whether you should take a loan to study or not? If so, how does it change it?

Related Discussions:- Question 1, economics

Favor of selling inventories, If producers expect future prices to enhance,...

If producers expect future prices to enhance, current supply will decline in favor of selling inventories at higher prices later.  In other words, supply will reduce (a shift to th

Explain why subsidies to domestic firms s a trade barrier, Explain why subs...

Explain why subsidies to domestic firms act as a trade barrier. A trade barrier is broadly explained as any market intervention whereby the ratio of price of exports to price o

Mrs and mrts, compare marginal rate of technical substitution and marginal ...

compare marginal rate of technical substitution and marginal rate of substitution

Inflation, how measure the inflation

how measure the inflation

Determinants of private demand - non-monetary benefits, Determinants of Pri...

Determinants of Private Demand - Non-Monetary Benefits Social status associated with university degrees is a determinant of investment decisions in higher education in the cas

Multiplant monopoly, #suppose EEPCO is amultiplant monopolist with two pla...

#suppose EEPCO is amultiplant monopolist with two plants: Gibe plant and Fincha plant. The operating costs of the two plants are: Gibe plant Tc1=10Q^2 and Fincha plant TC2=20Q^2.

Causes of inflation, Causes of inflation: Excessive growth in wages ...

Causes of inflation: Excessive growth in wages relative to productivity can cause inflationary pressures. This causes aggregate demand to increase relative to aggregate supp

Sustained increases in material productivity of human labor, Why were there...

Why were there not any sustained increases in material productivity of human labor back before 1500? Since improved technology quickly ran aground on resource scarcity. As huma

Marris model, explain marris model of the managerial enterprise

explain marris model of the managerial enterprise

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd