A Full-Time College Student Could Drop Out in His Senior

question 45

Multiple Choice

A full-time college student could drop out in his senior year and get a job paying $19,500.By finishing school,he incurs an opportunity cost equal to

• A) the college degree he gave up to take the job.
• B) the college tuition he would otherwise pay.
• C) the difference between the cost of tuition and $19,500.
• D) $19,500.
• E) zero.

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Definitions:

Annuities

Financial products that guarantee a fixed or variable stream of payments over time, often used for retirement savings or to generate steady income during retirement.

Effective Annual Rate

The interest rate on a loan or financial product restated from the nominal rate as an annual rate, taking compound interest into account.

Compounded Value

Refers to the result of reinvesting the interest or earnings of an investment, causing it to grow exponentially over time.

Annuity Due

An annuity with payments occurring at the beginning of each period.