A comparable sold 18 months ago for $340,000. Market conditions in this submarket have improved at 0.4% per month on a simple basis. What is the time-adjusted sale price?
Correct Answer
A) $364,480
Why this is correct: on a simple basis the monthly rate is multiplied by the number of months, not compounded. Calculation: 18 × 0.4% = 7.2%; $340,000 × 1.072 = $364,480. Why the other choices are wrong: $365,330 compounds the rate, which the stem did not specify and which overstates the change; $340,000 leaves eighteen months of a rising market unrecognized; $315,520 applies the change downward in a market described as improving.
Why This Is the Correct Answer
Why this is correct: on a simple basis the monthly rate is multiplied by the number of months, not compounded. Calculation: 18 × 0.4% = 7.2%; $340,000 × 1.072 = $364,480. Why the other choices are wrong: $365,330 compounds the rate, which the stem did not specify and which overstates the change; $340,000 leaves eighteen months of a rising market unrecognized; $315,520 applies the change downward in a market described as improving.
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