A Model Is Based on an Assumption That an Additional

question 83

Multiple Choice

A model is based on an assumption that an additional year of education increases a student's future wage by 20 percent.
-Refer to the scenario above.Which of the following statements is true about the model's prediction?

• A) The prediction cannot be verified empirically.
• B) The prediction is precise, exact, and accurate for the entire population.
• C) The prediction is an approximate relationship and may not hold for everyone.
• D) The prediction can be applied to estimate the returns only for a limited number of years of additional education.

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Definitions:

Tax-deferred

An investment in which taxes on the principal and/or earnings are delayed until the funds are withdrawn, commonly seen in retirement accounts like 401(k)s and IRAs.

Accumulation Period

The time frame in which an investment, such as a annuity, accumulates interest or income before disbursement or annuitization.

Distribution Period

The time frame over which payments are made from an investment, retirement plan, or insurance policy to the beneficiary.

Traditional IRA

A type of retirement account allowing individuals to direct pre-tax income toward investments, with taxes deferred until withdrawal.