Answer: C - $100, 000
The value of the house in year 2 will be $100,000
Explanation:
Year 1
Price = $50,000
Consumer price index = 101
Year 2
Price = X (unknown)
Consumer price index = 202
The Ratio of price of the house in year 2 to year 1 is equal to the ratio of consumer price index in year 2 to year 1
Thus:
x / 50,000 =202 / 101
Cross multiply
101x = 50,000(202)
101x = 10,100,000
Divide both sides by 101
x = 10,100,000 / 101
x = $100,000
The price of the house in year 2
= $100,000
