Inflation is a general increase in prices and may be measured by the Consumer Price Index (CPI). The following problem is related to price increases: 1. Your parents bought a home for $50,000 in 1982 and sold it in 2012 for $250,000. What was the annual rate of price increase over the 30 years?

Inflation is a general increase in prices and may be measured by the Consumer Price Index (CPI). The following problem is related to price increases: 1. Your parents bought a home for $50,000 in 1982 and sold it in 2012 for $250,000. What was the annual rate of price increase over the 30 years?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section5.A: Continous Compounding And Discounting

Problem 1P

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Concept explainers

Interest Rate

When you deposit your money with the bank, the deposit earns you some extra money at the end of the specific period – something more than what you deposited. That amount of money that the bank pays you for keeping the money with the bank is the “interest” and the percentage at which the bank pays you for your amount is called the “interest rate”.

Question

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Inflation is a general increase in prices and may be measured by the Consumer Price Index (CPI). The following problem is related to price increases:

1. Your parents bought a home for $50,000 in 1982 and sold it in 2012 for $250,000. What was the annual rate of price increase over the 30 years?

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