3) Consider two individuals, Susan and Rachel, who are deciding how much education to receive. The table below provides some information about each of them. Using the information in the table, calculate the required return for each person. Then calculate how much education each will get before stopping if their marginal rate of return can be represented as MRR = 13 - (0.25 * E) where E is the years of schooling. Susan Rachel Expected inflation 1.5 2 Risk premium Discount rate 2.5 2.5 2 2.5 Rate of borrowing 2.5 3

3) Consider two individuals, Susan and Rachel, who are deciding how much education to receive. The table below provides some information about each of them. Using the information in the table, calculate the required return for each person. Then calculate how much education each will get before stopping if their marginal rate of return can be represented as MRR = 13 - (0.25 * E) where E is the years of schooling. Susan Rachel Expected inflation 1.5 2 Risk premium Discount rate 2.5 2.5 2 2.5 Rate of borrowing 2.5 3

Personal Finance

13th Edition

ISBN:9781337669214

Author:GARMAN

Publisher:GARMAN

Chapter17: Retirement And Estate Planning

Section: Chapter Questions

Problem 1LTAI

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