Provide your answers in the space provided or the back of the page. Make sure to

Question

Provide your answers in the space provided or the back of the page. Make sure to scan all work pages.

Any quantitative questions require showing your work for full credit.

Round all $ problems to the nearest cent.

All other calculations must be to at least the fifth decimal place.

5. The following is a historical list of median home prices in two states.

                Year                       State 1 ($)                              State 2 ($)                                              GDP deflator (2009 base year)        

                1950                          9,564                                     5,396                                                  14.09

                1960                      15,100                                     9,800                                                  17.56

                1970                       23,100                                  13,000                                                  23.18

                1980                       84,500                                  43,900                                                  46.05

                1990                       195,500                                 50,800                                                  67.62

                2000                       211,500                                 74,400                                                  82.59

                2017 (estimate)    400,000                                 201,991                                                 113.61

a. Convert each price into current year dollars.

b. Determine how much a person would have had to pay in 1950 (for both states) to equal the 2017 real home value.

       c. For both states, determine the percentage increase in home values from 1950-2017 (one calculation for each).

Explanation / Answer

To convert each price into current year dollars, we will have to use the following formula. For example for 1950: Price in State 1/(GDP deflator/100); Price in State 2/(GDP defaltor/100). This will give us the following values: ? Year Price in State 1 Price in State 2 1950 67,877.92761 38,296.66430 1960 85,990.88838 55,808.65604 1970 99,654.87489 56,082.83003 1980 1,83,496.19978 95,331.16178 1990 2,89,115.64626 75,125.70245 2000 2,56,084.27170 90,083.54522 2017 3,52,081.68295 1,77,793.32805?? Total Payment in 1950 for both the states = $1,06,174.59191; Total Payment in 2017 for both the states = $5,29,875.01100; Remaining Payment to be paid by a person in 1950 for both the states = $4,23,700.41909 The percentage increase in home values from 1950-2017 for both the states is as follows: Year Percentage increase in home value for State 1 (%) Percentage increase in home value for State 2 (%) 1950 - - 1960 26.68461 45.72720 1970 15.89004 0.49128 1980 84.13168 69.98279 1990 57.55947 -21.19502 2000 -11.42497 19.91042 2017 37.48665 97.36493

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