In Questions Make the Assumption That the Change in Housing

question 31

Multiple Choice

In Questions make the assumption that the change in housing prices exactly matches the change in the CPI. In fact, housing is only part of the CPI, and figures into the CPI through rents rather than sale prices, so this assumption may be far from correct.
-In 1999, Rachel had the opportunity to either invest $100,000 for three years in the housing market or in a CD paying 3.5%. If the 1999 CPI is 166.6 and the 2002 CPI is 179.9, which is the better investment?

• A) the housing market
• B) the CD
• C) The options are equivalent.
• D) There is not enough information to know.

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