The Authors Note That an Appropriate Discount Rate for Most

question 78

Multiple Choice

The authors note that an appropriate discount rate for most U.S. households is near 5%. However, suppose you are considering the decision to attend graduate school, and you already have large credit card balances from your undergraduate years. If you decide to use a higher discount rate (e.g., 10%) to reflect your higher opportunity cost of money, what impact does this change in the discount rate have on the net present value of a graduate degree?

• A) Increases NPV
• B) Decreases NPV
• C) NPV would not change as long as we use nominal costs and returns.
• D) NPV may increase or decrease, and we cannot determine the direction of change without more information.

---

Definitions:

Competencies

A mix of skills, knowledge, and abilities that an individual possesses which are necessary for effective performance in a job or task.

Traits Or Skills

Characteristics or competencies that are inherent or developed, influencing an individual's ability to perform.

Relevant For Managers

Pertains to information, skills, or contexts that are particularly significant or useful in the field of management.

Socialized Power Motivation

The drive to influence or control others within the norms and rules of societal conduct.