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Must be APA format, answer all questions thoroughly, must have at least one verifiable, legitimate reference Due Sunday @ 4:00 PM June 9, 2019. 24 hours from now.

Post to respond to #1

FINC 331 W3

In your initial response to the topic you have to answer all 5 questions.

1. Calculate the annual compound growth rate of the house price during the period when the house was owned by Robert G. Goldstein (since 2007). (Round the number of years to the whole number).

CAGR = ((FV/PV) ^(1/N)) - 1

CAGR = ((28M /17.4M) ^ (1/7)) - 1

CAGR = 7.03%

The annual compound growth rate for the house from 2007 till 2014 is 7.03%

2. Assume that the growth rate you calculated in question #1 remains the same for the next 20 years. Calculate the price of the house in 20 years.

FV=PV(1+i)^n

FV=?

PV= 28M

I= 7.03%

N=20

FV= $28m (1+ .0703) ^ 20

FV= $108,960,362.61

With today’s value at $28 million, the final value after 20 years with 7.03% growth each year would be $108, 960,362.61 million

3. Assume the growth rate that you calculated in #1 prevailed since 1900. Calculate the price of the house in 1900.

PV= C/ (1+ I) ^114

PV= ? (Year 1900)

C= 28M

I= 7.03 %

N=114

PV= $28M/ (1+ .0703)^114

PV= $12,120.71

The cost of the house in 1900 would have been $12,120.71.

4. Assume the growth rate that you calculated in #1 prevailed since 1900. Which price was paid for the house in 1964?

FV=PV(1+i)^N

PV=$12,120.71

I= 7.03%

N=64

FV=$12,120.71 (1+.0703)^64

FV= $937,306.78

The cost of the house in 1964 would have been $937,306.78.

5. You were using the time value of money concept to answer the question #3. What is the time point 0 is this problem?

Time point 0 = beginning of time period = start of study (Lesson, n.d.)

Time point 0 = year 1900

Reference

Lesson THE RELATIONSHIP BETWEEN PRESENT VALUE, FUTURE VALUE, AND PAYMENTS. (n.d.). Retrieved from https://www.algebra.com/algebra/homework/Finance/PVFVPMT.lesson

Beginning of responses

James Bookout

June 4 at 8:12 AM

Hi Jaja:

Thanks for your early post. Please note that for all questions that need a calculation, you need to show your calculation. I can't give partial credit or advise you of the mistake, if needed, if I cant see the calculations.

For example item 4. The cost of the house in 1964, how did you calculate $3.2 million? You needed the following terms:

N=?

I/YR = ?

PV = ?

FY = solve for this number

thanks

Jodi Demay

June 4 at 2:13 PM

I got the same value of 4.04% of the interest rate based off the equation but what did you use for the rest of the questions to come to those conclusions?

I am not grasping the material that well and seeing the equations laid out by others help me understand a bit better but its still extremely confusing when it comes to putting the correct numbers where and FV and PV.

Kraig Johnson

June 4 at 3:54 PM

Jodi,

I am on the same page with you. It just isn't clicking in my head for some reason. Math and numbers have never been my strong suit and now add in formulas, etc.

Kraig

Jaja Georgelyn Duncan

Wed at 12:33 AM

Hello Professor Bookout,

I apologize, I edited my post to show all my calculations as well as the formula I used. I will make sure I show all my work in the future. Thank you.

Jaja Duncan~

Jaja Georgelyn Duncan

Wed at 12:38 AM

Hello Jodi,

I used this equation:

FV=PV(1+i)^n

28m= 17.4m (1+i)^12

I= 4.04%

CAGR = ((28M (^1/12) /17.4M) - 1

CAGR = 4.04%

The annual compound growth rate for the house from 2007 till 2019 is 4.04%

I also downloaded a couple apps that has scientific calculator. The app is called Calc Pro. I hope this helps. I had a very difficult time with the calculations as well. Good luck.

Jaja Georgelyn Duncan

Wed at 3:43 AM

Hello Jodi,

I also have a hard time understanding all the concepts. I was able to sign up for FINC 399 which is basically a tutoring class for all the financial courses. Its free and the instructor generally gets back to you within 24 hours of your questions. So I try and do my homework quizzes on Monday or Tuesday and anything I can't figure out I post my questions on FINC 399. I recommend signing up if you get a chance. Hopefully this helps.

Jaja Duncan

James Bookout

Wed at 8:13 AM

Hi Everyone:

The question states "during the period when the house was owned by Robert G. Goldstein (since 2007)" What was the period for which you calculated the growth rate? You would need "N" for your calculator inputs.

I posted previously that all TVM calculations will need several variables for to solve for the missing variable

N, PV, FV, PMT, I/YR.

thanks

Adrian Gomes

Wed at 8:59 PM

Duncan,

Great responses to the discussion. For the first one I calculated the annual compound growth to be 703. I used n to represent the time period where Mr Goldstein owned the house to get to my answer. I am uncertain if that method would get you the right answer.

Post to respond #2

1. Calculate the annual compound growth rate of the house price during the period when the house was owned by Robert G. Goldstein (since 2007). (Round the number of years to the whole number).

To figure out the compound growth rate we use the FV=PV(1+i)^n equation. Future Value = Present Value (1+interest)by time.

So future market of the house is 28 million = By current 2007 cost of home 17.4 million (1+i (which we are figuring out by this equation) by 12 =

Total for interest based off 28 million = 17.4 (1+i) by 12 = 4.04% which is the annual compounded growth rate.

2. Assume that the growth rate you calculated in question #1 remains the same for the next 20 years. Calculate the price of the house in 20 years.

With the growth rate of 4.04% per year times the cost of the home at 28 million would be 61.825 million in 20 years which is a change of 33.825 million.

3. Assume the growth rate that you calculated in #1 prevailed since 1900. Calculate the price of the house in 1900.

The price of the home would be based off the 1900 buy date and using the equation above would be the same equation but we dont know the present value.

The estimated cost based off my calculations would be an estimate of 265 million as each equation is providing a different amount and quite confusing (can someone maybe enlighten me on how to do this equation?) Thank you!

4. Assume the growth rate that you calculated in #1 prevailed since 1900. Which price was paid for the house in 1964?

The total for the home in 1964 would be approximately 3.7 to 3.8 million with 4.04% interest based off the 1st equation.

5. You were using the time value of money concept to answer the question #3. What is the time point 0 is this problem?

Point 0 for problem 3 would be the year which is the time point we are assessing. So the year we are trying to figure out the cost of the home for would be 1900 which would would time point 0

Jaja Georgelyn Duncan

Wed at 3:57 AM

Hello Jodi,

For #3 the present value is $28M. According to the beginning of the post: “Now Ms. Balsan’s onetime Hamptons home is slated to hit the market priced at $28 million with Tim Davis of the Corcoran Group.” So the formula for calculating the price in 1900 would go like this:

PV= C/ (1+ I) ^119

PV= ? (Price In 1900)

C= 28M (Current Price)

I= 4.04 % (Interest)

N=119 (119 because from 1900-2019 is 119 years)

PV= $28M/ (1+ .0404)^119

PV= $28/111.39

The cost of the house in 1900 would have been $251,369.06. I really hope I am not steering you wrong. Good luck.

Jaja Duncan

James Bookout

Wed at 8:10 AM

Hi Jodi:

you are the third person to arrive at 4.04% for the annual growth rate. The question states "during the period when the house was owned by Robert G. Goldstein (since 2007)". So wouldn't you need to calculate the growth rate during that period which = "N"?

Thanks