The price of an antique is expected to rise by 8% during the next year.The interest rate is 10%.You are thinking of buying an antique and selling it a year from now.You would be willing to pay a total of 800 dollars for the pleasure of owning the antique for a year.How much would you be willing to pay to buy this antique? (See Problem 5.)
A)40,000 dollars.
B)800 dollars
C)8,000 dollars.
D)16,800 dollars
E)8,000 dollars

Question

Quizplus · Accepted Answer

The price of the antique will be 1.08 times its current price in a year. You are willing to pay $800 for the pleasure of owning the antique for a year, so you would be willing to pay 1.08 times that amount, or $864, to buy the antique. The current price of the antique is therefore $864 / 1.08 = $800.

The Price of an Antique Is Expected to Rise by 8