A homebuilder’s advertising had the caption, “Inflation to Continue for Many Years.” The ad explained that if one buys a home now for $297,000, and construction cost inflation continues at 7%, the home will be worth $819,400 in 15 years. Thus, by buying a new home now, one can realize a profit of $522,400 in 15 years. Do you find this logic persuasive? Explain. Please show excel formulas

A homebuilder’s advertising had the caption, “Inflation to Continue for Many Years.” The ad explained that if one buys a home now for $297,000, and construction cost inflation continues at 7%, the home will be worth $819,400 in 15 years. Thus, by buying a new home now, one can realize a profit of $522,400 in 15 years. Do you find this logic persuasive? Explain. Please show excel formulas

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter22: Inflation

Section: Chapter Questions

Problem 37P: Rosalie the Retiree knows that when she retires in 16 years, her company will give her a one-time...

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Shea is pricing materials (wood, wire, pipe, etc.) for new home construction on a “per unit” basis. Inflation on materials has been running at 16.0% for the past 3 years and is expected to remain at that rate for the next 10 years. The actual dollars paid for expenses at the end of year 3 for a “unit” are $55,000. Solve, a. What did the same set of materials cost 3 years ago? b. If the trend continues, what will they cost 10 years from now?
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A# man# is# planning# to# retire# in# 20# years.# He# can# deposit# money# for# his# retirement# at# 8%# compounded# monthly.# It# is# estimated# that# the# future# general# inflation# (!)# rate# will# be# 3%# compounded#monthly.#What#deposit,#in# terms#of#constant#dollars, must#be#made#each#month#until# the#man#retires#so#that#he#can#make#annual#withdrawals#of#$20,000,#in#terms#of#actual dollars,#over# the#15#years#following#his#retirement?#(Assume#that#his#first#withdrawal#occurs#at#the#end#of#the#first# year after#his#retirement.)
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