Question

Lloyd is completing high school and wondering about his future. He needs to make a choice between pursuing a bachelor’s degree in business or pursuing an MBA. Lloyd lives in two periods, the first relating to his education and the second relating to employment commencing after graduation and extending through retirement. In the first period, he completes his education. In the second period, he works in the labor market. Lloyd determines to attend the University of Utah.

If Lloyd pursues a bachelor’s degree at the U of U, he will spend $52,000 on education in the first period and earn $2.4 million in the second period. If he pursues an MBA, he will spend $139,000 on education in the first period and earn $2.8 million in the second period. Lloyd seeks to maximize his lifetime earnings.

Now suppose that Lloyd can lend and borrow money at a 10% rate of interest between the two periods. Which option will he pursue? Explain using math and description.

Answer 1

Lloyd spend $52000 on education of bachelor business and earn in second period $2.4

For MBA He spend $139000 and earn $2.8 in second period

Bachelor of business is more maximixa lifetime than MBA

because he spend Approx 166 % more on MBA than bachelor and earn(2.8-2.4)=.4million $

As well as he give more interest on MBA education than bachelor