user_name, you're still misunderstanding the point about discounting. It's an additional adjustment for the consumer's impatience, above and beyond the interest rate. So when you put in the interest rate, you are accounting for the fact that the $40,000 could have been invested at a return (of 4%, in your example) but you are not accounting for the fact that even if the interest rate was 0, you'd still have to pay me more than $1000 tomorrow to make me indifferent to giving up $1000 today. The discount rate and the interest rate are not the same thing. Does that make sense?
As for my profile, I don't have it posted -- I like to maintain some anonymity
My class is mostly American: we have maybe 5 of 21 international students. We are an outlier, though. Overall, classes at Michigan are more like 2/3 -1/2American, 1/3-1/2 international. I think the 20% figure you reference is a little low, but in general, I think Michigan has a higher fraction of American students than comparable schools.