Question

How much has the price of housing increased on average per year over the time period in percentage terms?

In 1975 the price of a new house was $48,510. In 2020 the price of a new house is $188,657.

How much has the price of housing increased on average per year over the time period in percentage terms?

State your answer to two decimal places (e.g., 4.76)

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Homework Answers

Answer #1

Information provided:

Future value= $188,657

Present value= $48,510

Time= 2020 - 1975 = 45 years

The question is solved by computing the yield to maturity.

The yield to maturity is calculated by entering the below in a financial calculator:

FV= 188,657

PV= -48,510

N= 45

Press the CPT key and I/Y to compute the yield to maturity.

The value obtained is 3.0641.

Therefore, the price of the housing increases by 3.06% per year over the time period.

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