1. Calculate the annual compound growth rate of the house price during the perio
ID: 2737077 • Letter: 1
Question
1. Calculate the annual compound growth rate of the house price during the period when the house was owned by Robert G. Goldstein (since 2007). (Round the number of years to the whole number). Please show your work.
Price in 2007 = $ 17.4 Mn
Price in 2014 = $ 28 Million
=28/17.4 =(1+r)^7
r = 1.60919^(1/7)
=7.03%
2. Assume that the growth rate you calculated in question #1 remains the same for the next 20 years. Calculate the price of the house in 20 years. Please show your work.
Price of house after 20 years = 28 * ( 1 + 7.03%)^20 = 28 * 3.891 = 108.95 Million
Assume the growth rate that you calculated in #1 prevailed since 1900. Calculate the price of the house in 1900
Explanation / Answer
Value in 1900 = Value in 2007 / ( 1 + 7.03%)^107 =
= 17400000 / 1435.791 = 12118.76
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