A house sold for $280,000 and resold twelve months later, unchanged, for $294,000. What annual rate of change does this pair indicate?
Correct Answer
A) 5.0%
Why this is correct: the rate is measured against the earlier price, which is what the market moved away from. Calculation: ($294,000 - $280,000) ÷ $280,000 = 5.0%. Why the other choices are wrong: 4.8% divides the change by the later price, which answers a different question and always understates a rise; 5.3% matches neither denominator; 14.0% reports the dollar change in thousands rather than a rate.
Why This Is the Correct Answer
Why this is correct: the rate is measured against the earlier price, which is what the market moved away from. Calculation: ($294,000 - $280,000) ÷ $280,000 = 5.0%. Why the other choices are wrong: 4.8% divides the change by the later price, which answers a different question and always understates a rise; 5.3% matches neither denominator; 14.0% reports the dollar change in thousands rather than a rate.
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