What is the real annual rate of return

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Consider again the following problem: On Jan. 1, 1965, you purchased a small house in Alameda, California for $20,000. On Jan. 1, 2015, you sold the house for $900,000.

Assume that a bundle of goods deemed representative of the cost of living as of Jan. 1, 1965 is valued as $100. Assume that a similar bundle of goods deemed representative of the cost of living as of Jan. 1, 2015 is $525. Using these bundles of goods to calculate an inflation rate, what is the real annual rate of return (compounded annually) on the investment in the house?

Reference no: EM13737170

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