Studies have concluded that a college degree is a very good

Studies have concluded that a college degree is a very good investment. Suppose that a college graduate earns about 68% more money per hour than a high- school graduate. If the lifetime earnings of a high-school graduate average $1100,000, what is the expected value of earning a college degree?

Solution

The expected value of earning by a college degree holder = high school graduate average earning + Probability of earniong more*high school graduate average earning

= $1100,000 + 0.68*$1100,000 = $1,848,000