Question

attending a certain college results in a total present worth of student loans of $30,000. additional wages gained from obtaining a college-required job will result in you making an average of $15,000 more per year in wages relative to a job that required no college degree for the first five years. assuming an interest rate of 6%, the benefit-cost ratio of getting a college-required job after five years is most nearly:

Answer 1

The benefit-cost ratio of getting a college-required job after five years is 1.93, which means the benefits outweigh the costs.

Step-by-step explanation:

To calculate the benefit-cost ratio of getting a college-required job after five years, we need to consider the present worth of the student loans and the additional wages gained from the job. The present worth of the student loans is $30,000. The additional wages gained from the job are $15,000 per year for five years, which is a total of $75,000. Using an interest rate of 6%, we can calculate the present worth of the additional wages:

Present Worth = Future Value / (1 + Interest Rate)^Number of Periods

Present Worth = $75,000 / (1 + 0.06)^5

Present Worth = $57,977.10

The benefit-cost ratio is calculated by dividing the present worth of the additional wages by the present worth of the student loans:

Benefit-Cost Ratio = Present Worth of Additional Wages / Present Worth of Student Loans

Benefit-Cost Ratio = $57,977.10 / $30,000

Benefit-Cost Ratio = 1.93 (rounded to two decimal places)