Problem Set 8 - Human Capital April 12, 2010 1. An...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Human Capital April 12, 2010 1. An individual lives for three periods. He is currently considering three alternative education-work options. He can start working immediately, earning $100 , 000 in period 1 $110 , 000 in period 2 (as his work experience leads to higher productivity), and $90 , 000 in period 3 (as his skills become obsolete and his physical abilities deteriorate). Alternatively, he can spend $50 , 000 to attend college in period 1 and then earn $180 , 000 in periods 2 and 3. Finally, he can receive a doctorate degree in period 2 after completing his college education in period 1. The last option will cost him nothing when he is attending graduate school in the second period as his expenses on tuition and books will be covered by a research assistantship. After receiving his doctorate, he will become a professor in the business school and earn $400 , 000 in period 3. The interest rate is 20 percent. What education path maximizes the individual’s net present value of his lifetime earnings? 2. An individual is considering a 1-year training program, which charges $20
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 2

Problem Set 8 - Human Capital April 12, 2010 1. An...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online