Question

A house cost $320,000 in 2005. By the year 2019, its value was $560,000. What was the growth rate as a percent for that 14-year period?

A. 4.08%
B. -4.08%
C. -3.92%
D. 3.92%

Answer 1

The growth rate of the house value over the 14-year period is calculated using the compound annual growth rate (CAGR) formula. The correct annual growth rate is found to be 3.92%, which corresponds to option D.

Step-by-step explanation:

To find the growth rate of the house value over a 14-year period from 2005 to 2019, we can use the formula for the compound annual growth rate (CAGR), which is given by:

CAGR = [(Ending value/Beginning value)^(1/n)] - 1

where:

• Ending value is $560,000
• Beginning value is $320,000
• n is the number of years (14 in this case)

Inserting these values into the formula, we get:

CAGR = [($560,000/$320,000)^(1/14)] - 1 ≈ 0.0392 or 3.92%

So the correct answer is 3.92% annual growth rate, which corresponds to option D.