Question

Assume that in January 2017, the average house price in a particular area was $300,400. In January 2001, the average price was $207,300. What was the annual increase in selling price

Answer 1

Answer:

r = 0.023455 or 2.3455% rounded off to 2.35%

Explanation:

We are given the future value and the present value of house. To calculate the annual percentage increase in the price of the house over the period of 16 years from January 2001 to January 2017, we can use wither use the formula for Future Value or Present value.

Here we are solving it using the future value formula which is,

FV = PV * (1 + r)^t

Where,

• FV is Future Value
• PV is Present value
• r is the annual rate of increase
• t is time period in years

Plugging in the values for FV, PV and t, we can calculate the value of r r annual percentage increase in the price.

300400 = 207300 * (1 + r)^16

300400 / 207300 = (1 + r)^16

1.449107574 = (1 + r)^16

Eliminating the power 16 by taking a power of 1/16 on both sides.

(1.449107574)^1/16 = (1 + r)^16/16

1.023455087 = 1 + r

1.023455087 - 1 = r

r = 0.023455 or 2.3455% rounded off to 2.35%