Reference no: EM132426363
The Hamptons Home of a Famed Socialite Hits the Market
"Before there was Paris Hilton, there was Consuelo Vanderbilt Balsan - a Gilded Age heiress and socialite, re-nowned for her beauty and wealth. Now Ms. Balsan's onetime Hamptons home is slated to hit the market priced at $28 million with Tim Davis of the Corcoran Group.
Located on Ox Pasture Road in Southampton, the shingle-style home was built around 1900 and is known as "Gardenside" or "Cara-Mia". Ms. Balsan, the great-granddaughter of railroad magnate Cornelius Vanderbilt, owned the house until her death in 1964.
According to public records, the estate is owned by Robert G. Goldstein, executive vice president and president of global gaming operations at Las Vegas Sands Corp, and his wife Sheryl, who purchased the house in 2007 for $17.4 million." (The Wall Street Journal, August 1, 2014, M2)
NOTE: In order to not get confused by periods, all dates are assumed to be at the end of the period. For example, "around" 1900 would be at the end of 1900 and until her death in 1964 would be at the end of 1964, since 2007 would be the end of 2007.
In your initial response to the topic you have to answer all 5 questions.
1. Calculate the annual compound growth rate of the house price during the period when the house was owned by Robert G. Goldstein (since 2007). (Round the number of years to the whole number).
2. Assume that the growth rate you calculated in question #1 remains the same for the next 20 years. Calculate the price of the house in 20 years.
3. Assume the growth rate that you calculated in #1 prevailed since 1900. Calculate the price of the house in 1900.
4. Assume the growth rate that you calculated in #1 prevailed since 1900. Which price was paid for the house in 1964?
5. You were using the time value of money concept to answer the question #3. What is the time point 0 is this problem?