你。。。我。。。他。。。

Grading

I was grading an undergraduate Engineering Economics exam. The first problem in the exam is as follow:
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A local symphony association offers memberships as follows:

Continuing membership, per year $ 15
Patron lifetime membership $ 375

The patron membership has been based on the symphony association’s belief that it can obtain a 4% rate of return on its investment. If you believed 4% to be an appropriate rate of return, would you be willing to purchase the patron membership? Explain why or why not.

Answer:
Since its a lifetime membership problem, use a capitalized cost method. With 4% rate of return, the lifetime membership is equivalent to the continuing membership.
Thus, the answer will be a Yes, because they are both equivalent.
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And guess what kind of answers I got?

"Yes, because the cost of checks for the rest of my life would make it worth choosing a single payment, also $375*4% = $15, making the two options equivalent since I plan to live forever and I enjoy the symphony, so giving a little extra would make me feel nice if I were to die."

"I am only 25 by purchasing the lifetime membership I would need to around for at least 25 years (375/15) to make money from it. Being 4% of 375 is 15, I would buy the lifetime membership."

"Yes I would purchase the patron membership b/c the capitalized cost of the yearly membership is equal to the patron membership and I am okay with a 4% ROR."

"In 25 years, the continuing membership will cost the same as the lifetime patron membership. I, at 21 years of age, would benefit from buying the patron lifetime membership assuming that I will continue to enjoy the symphony well part 46 years of age and that I will still be living in my lovely local town."

"The continuing membership fee and the patron lifetime membership are equivalent, therefore either one would be appropriate. However due to the fact that people don't live forever, it would probably be wiser to choose the continuing membership in case you die or change your mind about being a member."

"In this situation, purchasing lifetime membership would not be desirable since the ROR dictates that you would have to use the membership close to 80 years at 4% to equal paying $15/year. Since this is unlikely, I would avoid the lifetime membership."

"For the symphony this would come to an equivalent of 15 dollars per year from the member. Assuming you are of middle age, you will not be a member for more than 40 years. Taking that into consideration, at 4% you could be getting $18.9 back every year. So I would not take the lifetime membership."
**Note "you are of middle age"....he/she is analyzing for my Boss!!

"No, I would not purchase because I do not see any of the return, I just pay a higher fee."

"I would not be willing to buy the patron membership as with a 4% ROR, it would take over 100 years from this point in time to gain equal to the continuing membership & it is unlikely a person would live to be that old."

posted by Trouble @ 9:33 AM