Thread: precentage

an investor purchased a house in january 2004 for $200,000. Assume inflation has averaged 4% per annum in the meantime and other costs amounted to $3500 per year

a) (if able to show) draw a table showing (in whole dolla) the effect on inflation on the value of the house in 2004,2005,2006,2007 and 2008 (in january of each year)

b) If the house was sold in january 2008 for 27000 Calculate -

1) the net profit
2) the total percentage return on the original investmeny
3) the average annual return to the investor as a %


come on guys help me here :P

Originally Posted by n7x

an investor purchased a house in january 2004 for $200,000. Assume inflation has averaged 4% per annum in the meantime and other costs amounted to $3500 per year

a) (if able to show) draw a table showing (in whole dolla) the effect on inflation on the value of the house in 2004,2005,2006,2007 and 2008 (in january of each year)

b) If the house was sold in january 2008 for 27000 Calculate -

1) the net profit
2) the total percentage return on the original investmeny
3) the average annual return to the investor as a %


come on guys help me here :P

You're kidding, right? Why can't you step through a measly four years?

2004: 200000
2005: 200000(1.04)
2006: 200000(1.04)^2
2007: 200000(1.04)^3
2008: 200000(1.04)^4

Surely you could have done that. Since you didn't show ANY work, I'm going to require you to answer three questions:

1) What is the nature of the annual $3500 expense? Beginning of year? End of year? Spread throughout the year? Quarterly? This assumption WILL make a difference in the annual return to the investor.

2) Did you really mean a selling price of $27,000? That seems like a bit of a loss.

3) Will the investment return change if we DON'T assume the average inflation rate throughout the entire period. In other words, suppose the value of the house does this:

2004: 200000
2005: 200000
2006: 200000
2007: 200000
2008: 200000(1.04)^4

That's still an "Average" inflation rate of 4%

Or this:

2004: 200000
2005: 200000(1.04)^4
2006: 233972
2007: 233972
2008: 233972

That's still an "Average" inflation rate of 4%

Or this:

2004: 200000
2005: 1000000
2006: 800000
2007: 600000
2008: 233972

That's still an "Average" inflation rate of 4%

Note: Please show your work. I'm much less inclined to be jumpy and confrontive if you show some personal effort.