User Account

All Pages

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

Example on indifference curves and budget lines, Since 1990, real income ha...

Since 1990, real income has increased rapidly , yet the average number of children per family has decline ." Three possible explanations for this process are given below.

Final Exam, I wont final Exam

I wont final Exam

Equilibrium level of economic output, Provide an economic explanation of wh...

Provide an economic explanation of what you have shown in your diagram above.  Iceland was a small open economy with perfect capital mobility. Consequently, the equilibrium domesti

Market Power, Which of the following is evidence of market power? a. Output...

Which of the following is evidence of market power? a. Output is fixed despite cost changes b. Optimal Output is less than industry output c. Output changes as cost changes

Equilibrium of a multi product firm, explain graphically Equilibrium of a ...

explain graphically Equilibrium of a multi product firm

Separate administrative set-up for exports, Separate Administrative Set-up ...

Separate Administrative Set-up for Exports:   It may be worth examining the setting up of Foreign Trade Board, similar to what obtains in Japan (JETRO) and South Korea (KETRO)

Theory, Explainbainlimitpricetheory

Explainbainlimitpricetheory

MIF, What is the purpose of the IMF and why might the IMF be called the “le...

What is the purpose of the IMF and why might the IMF be called the “lender of last resort”? Discuss how three of the tools they use for establishing economic stability in a country

Opportunity cost, define opportunity cost and how it is useful in manageria...

define opportunity cost and how it is useful in managerial decision making?

Determine the cost efficient levels of emissions reduction, Determine the C...

Determine the Cost Efficient Levels of Emissions Reduction Two firms produce a pollutant called Q.  The total cost of reducing emissions of Q are as follows for Firm 1 and Fir

Write Your Message!

Captcha
Order Assignment

Featured Services

Order Now

Popular Subjects

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +91-977-207-8620

Phone: +91-977-207-8620

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

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