In Questions Make the Assumption That the Change in Housing

question 56

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 1997, Howard had the opportunity to either invest $100,000 for five years in the housing market or in a CD paying 2.5%. If the 1997 CPI is 160.5 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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Definitions:

Liquidating Dividend

A type of dividend paid by a company from its capital rather than its earnings, often during dissolution or winding down.

Date of Record

The cut-off date set by a company in order to determine which shareholders are eligible to receive a dividend or distribution.

Earnings Per Share

Earnings per share (EPS) is a financial metric that represents the portion of a company's profit allocated to each outstanding share of common stock, indicating the company's profitability.