Assume that in January 2010, the average house price in a particular area was $276,400. In January 2002, the average price was $193,300. What was the annual increase in selling price?

Assume that in January 2010, the average house price in a particular area was $276,400. In January 2002, the average price was $193,300.

  

What was the annual increase in selling price? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

 

Annual increase in selling price

%

Explanation:

We can use either the FV or the PV formula. Both will give the same answer since they are the inverse of each other. We will use the FV formula, that is:

FV = PV(1 + r)t

Solving for r, we get:

r = (FV / PV)1 / t – 1

r = ($276,400 / $193,300)1/8 – 1 = 0.0457, or 4.57%

Calculator Solution:

Note: Intermediate answers are shown below as rounded, but the full answer was used to complete the calculation.

Enter

8

$193,300

±$276,400

N

I/Y

PV

PMT

FV

Solve for

4.57%