<PRE><B>Question 38199</B>
P = purchase price
a = rate of appreciation
V(1) = value after 1 year
V(2) = value after 2 years
The first year, a = 5%
P = 120000
V(1) = P + aP
V(1) = 120000 + (.05)(120000)
V(1) = 120000(1 + .05)
V(1) = 126000
V(2) = V(1) + aV(1)
V(2) = 126000 + (.04)(126000)
V(2) = 126000(1 + .04)
V(2) = 131040
the answere is (d) 131,000
discount rate = (original price) - (discounted price) / (original price)
28000 - 25200 = 2800
2800 / 28000 = .10
the answer is (c) 10%</PRE>