If a home buyer purchased a home for $232,500 in 2016 and home prices escalate in cost at an inflation rate of 3

Economics Dec 16, 2020

If a home buyer purchased a home for $232,500 in 2016 and home prices escalate in cost at an inflation rate of 3.6 percent (%) each year, what will the same home cost in 2042? Answer: GE NEXT PAGE

Expert Solution

Purchase price of a home in 2016 = $232,500

Given that Inflation rate of home prices = 3.6% per year

Number of years between 2016 and 2042 = 2042-2016 = 26

Home prices in the year of 2042 = $232,500 x (1+Inflation rate)²⁶ = $232,500 x (1+3.5%)²⁶ = $232,500 x (1+0.036)²⁶ = $583,145.06

Ans: $583,145.06

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