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valentinak56 [21]
3 years ago
11

An economist makes an assumption that each additional year of education causes future wages to rise by 7 percent. In this​ model

, if a person with 12 years of education makes ​$21 000 per​ year, then a person with 4​-year college degree would earn ​? per year.​ (Round your intermediate calculations to two decimal​ places.)
Business
1 answer:
ladessa [460]3 years ago
8 0

Answer:

Wage year 4= $12222.19

Explanation:

Giving the following information:

Each additional year of education causes future wages to rise by 7 percent.

A person with 12 years of education makes ​$21 000 per​ year.

A person with 4 years of education=$?

We will use the present value formula to calculate the wage in year 0. Then with the final value formula calculate the year 4 wage.

PV= FV/[(1+r)^n]

FV=final value at t time

r= rate

n= period of time

PV= 21000/(1,07^12)= $9324. 2511

Final Value= PV*(1+r)^t

Final Value year 4= 9324.2511*(1,07^4)= $12222.19

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