Assume that in January 2013, the average house price in a particular area was $280, 400. In January 2001, the average price was $197, 300. What was the annual increase in selling price? (Do not round intermediate calculations. Enter your answer as a percent rounded answer to 2 decimal places, e.g., 32.16.) Annual increase in selling price %
Expert Answer
Present value = future value / (1 + interest rate)time period
197300 = 280400 / (1 + interest rate)12
(1 + interest rate)12 = 280400 / 197300
(1 + interest rate)12 = 1.4212
[(1 + interest rate)12 ]1/12 = (1.4212)1/12
1 + interest rate = 1.0297
interest rate = 1.0297 – 1
interest rate = 2.97%
Therefore, Annual increase in selling price is 2.97%
Note:- Time period is from 2001 to 2013 = 12 years