Why Does the NPV of a College Education Tend to Be

question 145

Multiple Choice

Why does the NPV of a college education tend to be positive but relatively small?

• A) College students tend to be young and poor, so their opportunity cost of capital is high.
• B) College graduates typically have limited on-the-job skills, so their initial returns from the education investment tend to be small.
• C) There are few barriers to entry for a college education.
• D) Most of these studies are based on nominal interest rates, so the NPV is smaller than we would achieve under real interest rates.

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An individual or entity legally bound to provide a payment or perform a service under the terms of a contract.

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One to whom an obligation is owed.

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One to whom contract duties are delegated by another, called the delegator.