You have decided to buy a yacht, specifically, a Nautor's Swan 68 sailing yacht. This lovely boat cost $384,300 in 1976, when the CPI was 57. The CPI at the beginning of 2000 was about 168, and the yacht then cost $2,300,000. What is the 1976 yacht price expressed in 2000 dollars?
A) $130,388
B) $780,357
C) $1,132,674
D) $6,778,947

Question

Quizplus · Accepted Answer

To convert the 1976 price to 2000 dollars, we need to adjust for inflation using the CPI.

First, we calculate the inflation rate between 1976 and 2000:

Inflation rate = (CPI in 2000 - CPI in 1976) / CPI in 1976 
Inflation rate = (168 - 57) / 57 
Inflation rate = 1.9474

This means that prices increased by a factor of 1.9474 between 1976 and 2000 due to inflation.

To find the 1976 price in 2000 dollars, we multiply the 1976 price by the inflation factor:

1976 price in 2000 dollars = 384,300 * 1.9474 
1976 price in 2000 dollars = $748,331.62

Therefore, the closest answer choice is C, $1,132,674.

You Have Decided to Buy a Yacht, Specifically, a Nautor's