Question
In: Finance
1. In 1975 the price of a new house was $50,000. In 2015 the price of...
1. In 1975 the price of a new house was $50,000.
In 2015 the price of a new house is $300,000.
How much has the price of housing increased over the entire 40 years in percentage terms?
| A.5.00% |
| B.600% |
| C.4.58% |
|
D.500% 2. The current cost of tuition is $12,000 per year.
|
Solutions
Expert Solution
Answer 1
Price of new house in 1975= $50,000
Price of new house in 2015 = $300,000
Time in years = 2015 - 1975= 40
Price increase rate (inflation rate) formula = ( (Value in
2015/Value in 1975)^(1/no. of years)) -1
=((300000/50000)^(1/40)) - 1
=0.04581238649 or 4.58%
So, Answer is C 4.58%
Answer 2
Current Cost of tution = 12000 per
year
inflation rate = 5% per year
Time in years = 20
Future cost = current cost*(1+inflation rate)^no of
years
=12000*(1+5%)^20
=31839.57246
So , cost of tution in 20 years is $31840. Answer A.
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jeff jeffy answered 1 year agoRelated Solutions
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