Your Son Is About to Start Kindergarten in a Private

question 58

Multiple Choice

Your son is about to start kindergarten in a private school.Currently,the tuition is $12,000 per year,payable at the start of the school year.You expect annual tuition increases to average 6% per year over the next 13 years.Assuming that you son remains in this private school through high school and that your current interest rate is 7%,then the present value of your son's private school education is closest to:

• A)$332,300
• B)$137,900
• C)$155,800
• D)$156,000

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Definitions:

Rational Self-Interest

The principle that individuals tend to make decisions that they believe are best for themselves, maximizing their own utility.

Values

The principles or standards of behavior that are regarded as important in making decisions or judgments.

Sold

The completed transaction of exchanging a good or service for money or other compensation.

Reservation Price

The absolute highest price that a buyer is prepared to pay for a product or service.