Rates of Return
The algebraic method for calculating the rate of return, i, is based on the equality of instantaneously incurred costs, C, and the stream of returns to education, R
t
, t = 1, ... ,
, expressed in terms of present value. That is
C =
t
R
t
(1+i)
-t
C =
t
R
t
(1-i)
-t
C =
t
R
t
(1+i)
-
C =
t
R
t
(1-i)
-
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Exit
, expressed in terms of present value. That is