Question

If the price of attending Big Benefits University is $42,000 a year, including tuition, fees, books, and foregone earnings, what is the marginal cost of attending, if it takes you 5 years to graduate, and you assume a 3% annual inflation rate? What formula would you use? What is your r?

Answer 1

$229673.215

Explanation:

Given : The price of attending Big Benefits University is $42,000 a year, including tuition, fees, books, and foregone earnings

To Find : what is the marginal cost of attending, if it takes you 5 years to graduate, and you assume a 3% annual inflation rate?

Solution:

Principal = $42000

Time = 5 years

Rate = 3% = 0.03

Formula :
`A=P(1+r)^t`

`A_1=42000(1+0.03)^1`

`A_1=43260`

`A_2=42000(1+0.03)^2`

`A_2=44557.8`

`A_3=42000(1+0.03)^3`

`A_3=45894.534`

`A_4=42000(1+0.03)^4`

`A_4=47271.370`

`A_5=42000(1+0.03)^4`

`A_5=48689.511`

So , Marginal cost = 43260+44557.8+45894.534+47271.370+48689.511

Marginal cost = $229673.215

Hence the marginal cost of attending, if it takes you 5 years to graduate, and you assume a 3% annual inflation rate is $229673.215