Question

Sharon is 18 and would like to buy a house when she is 34. What is the discount factor for today's prices if the housing values increase 7% per year?

A. 12.0% * I think maybe this one.
B. 14.29%
C. 33.9%
D. 66.1%

Answer 1

If I did the math right it should be A. 12.0%

Answer 2

we are given that

Sharon is 18 and would like to buy a house when she is 34.

it mean
`n=34-18=16`

we have been asked to find the discount factor for today's prices if the housing values increase 7% per year?

It mean
`r=0.07, Annual \ Compounding.`

As we know that

`A=p(1+r)^(nt)`

Let current price be 100, then the future price will be

`image`

Hence the discount factor is
`=(100)/(295.2) *100=33.87 Percent`

Hence the correct option is 33.9%.