Getting a professional degree can b

Getting a professional degree can be evaluated as ________.a social security decisionan investment in human capitalan investment in a consumer durablea tax exempt decisionAnswer: (b)Suppose you will face a tax rate of 20% before and after retirement. The interest rate is 8%. You are 30 years before your retirement date and invest $10,000 to a tax deferred retirement plan. If you choose to withdraw the total accumulated amount at retirement, what will you be left with after paying taxes?$51,445$64,000$80,501$100,627Answer: (c)Suppose you will face a tax rate of 20% before and after retirement. The interest rate is 8%. You are 30 years before your retirement date and have $10,000 to invest. If you invest this in an ordinary savings plan instead of a tax deferred retirement plan, what amount will you have accumulated at retirement? $51,445$64,000$80,501$100,627Answer: (a)When your tax rate remains unchanged, the benefit of tax deferral can be summarized in the rule, “deferral earns you ________.”the after-tax rate of return before taxthe pretax rate of return after taxthe after-tax rate of return after taxthe pretax rate of return before taxAnswer: (b)From an economic perspective, professional training should be undertaken if the ________ exceeds the ________.future value of the benefit; present value of the costspresent value of the benefits; future value of the costsfuture value of the benefits; future value of the costspresent value of the benefits; future value of the costsAnswer: (d)Suppose you will face a tax rate of 30% before and after retirement. The interest rate is 6%. You are 35 years before your retirement date and $2,000 to a tax deferred retirement plan. If you choose to withdraw the total accumulated amount at retirement, what will you be left with after paying taxes?$7,532$10,760$12,298$15,372Answer: (b)Kecia is currently thirty years old and she plans to retire at age sixty. She is expected to live to age eighty-five. Her labor income is $45,000 per year and she intends to maintain a constant level of real consumption spending over the next fifty-five years. Assuming a real interest rate of 4% per year, no taxes, and no growth in real labor income, what is the value of Kecia’s human capital?$31,797$35,196$778,141$994,888Answer: (c)Kecia is currently thirty years old and she plans to retire at age sixty. She is expected to live to age eighty-five. Her labor income is $45,000 per year and she intends to maintain a constant level of real consumption spending over the next fifty-five years. Assuming a real interest rate of 4% per year, no taxes, and no growth in real labor income, what is the value of Kecia’s permanent income?$31,797$35,196$778,141$994,888Answer: (b)Oscar is currently thirty-five year old, plans to retire at age sixty-five, and to live to age eighty-five. His labor income is $40,000 per year, and he intends to maintain a constant level of real consumption spending over the next fifty years. Assuming a real interest rate of 4% per year, no taxes, and no growth in real labor income, what is the value of Oscar’s human capital?$884,344$691,681$39,999$32,198Answer: (b)Oscar is currently thirty-five year old, plans to retire at age sixty-five, and to live to age eighty-five. His labor income is $40,000 per year, and he intends to maintain a constant level of real consumption spending over the next fifty years. Assuming a real interest rate of 4% per year, no taxes, and no growth in real labor income, what is the value of Oscar’s permanent income?$884,344$691,681$39,999$32,198Answer: (d)You are currently renting a house for $12,000 per year, and you also have an option to buy it for $240,000. Maintenance and property taxes are estimated to be $4,320, and these costs are included in your rent. Property taxes ($2,880 of the $4,320) are deductible for income tax purposes. Your tax rate is 35%. You wish to provide yourself with housing at the lowest present value of cost. If the real after-tax rate is 2.52%, should you rent or buy?rent the house; the PV cost of renting is $476,190rent the house; the PV cost of renting is $309,524buy the house; the PV cost of owning is $442,198buy the house; the PV cost of owning is $371,429Answer: (d)You are currently renting a house for $12,000 per year and you also have an option to buy it for $240,000. Maintenance and property taxes are estimated to be $4,320, and these costs are included in your rent. Property taxes ($2,880 of the $4,320) are deductible for income tax purposes. Your tax rate is 35%. You wish to provide yourself with housing at the lowest present value of cost. The real after-tax rate is 2.52%. What is the break-even rent?$6,048$9,360$10,128$12,302Answer: (b)As one gets older, the ________ declines, so ________ falls steadily until it reaches zero at age 65.future value of remaining labor income; human capitalfutu