Paula Is Considering Going to Law School

Paula is considering going to law school. If she does, she will spend $60,000 on tuition and books to get a college education (during the first time period) , $120,000 on tuition and books to get a law degree (during the second time period) , and her law degree will earn her $620,000 during the remainder of her work-life (during the third time period) . Paula's time preference for money is associated with a per-period interest rate of 20 percent. Approximately what is Paula's present value of obtaining a law degree?

A) $100,100
B) $210,400
C) $270,500
D) $440,000
E) $621,900

Correct Answer:

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