What is the value of your education

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Reference no: EM131235377

Going to your school has total additional and opportunity costs of $30,000 this year and up front.

With 90% probability, you are likely to graduate from your school. If you do not graduate, you have lost the entire sum.

Graduating from the school will increase your 40-year life time annual salary by roughly $5,000 per year, but more so when the stock market rate of return is high than when it is low.

For argument's sake, assume that your extra-income beta is 1.5. Assume the risk-free rate is 3%, and the equity premium is 5%. What is the value of your education?

Reference no: EM131235377

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