Suppose All 18-Year-Olds Are Identical in Every Way Except That

question 19

Multiple Choice

Suppose all 18-year-olds are identical in every way except that some have easy access to credit (i.e., they face a low interest rate when borrowing money) while others have a difficult time accessing credit (i.e., they face a high interest rate when borrowing money) . Which of the following statements is not true?

• A) Those who have easy access to credit have a lower rate of discount than those who do not have easy access to credit.
• B) Those who have easy access to credit will be more likely to go to college than those who do not have easy access to credit.
• C) The present value calculation of college will be higher for those who have easy access to credit than for those who do not have easy access to credit.
• D) Some people who have easy access to credit will not go to college.
• E) No one without easy access to credit will go to college.

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Definitions:

Total Assets

The complete sum of everything a company owns or controls that has economic value, shown on the balance sheet.

Owner's Equity

Owner's equity is the residual interest in the assets of the entity after deducting liabilities, representing what the owners or shareholders own outright.

Total Liabilities

The combined amount of all debts and other financial obligations owed by an entity at a given time.

Liabilities

Financial obligations owed by a business to others, such as loans, accounts payable, and mortgages, which must be paid in the future.