RE Licence Textbook is WRONG, I'M RIGHT!

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Posted by investorapprentice on June 07, 2009 at 08:34:23:

I have a hard time believing it, but my coworker insists the book answer is wrong. I am hoping you guys can offer some clarification on this matter.

Here's the question in question copied verbatim:

The value of your house, not including the lot is $91,000.00 today. What was the original cost if it has depreciated 5% per year for the past 7 years.

A. $67,407.41
B. $95,789.47
C. $122,850.00
D. $140,000.00

It seems pretty straight forward to me, and I answered the question correctly (according to the answer key), but my coworker insists it is wrong and he is right. And I can see his point about compunding not being factored into the book's equation, but I am thinking that perhaps this variable doesn't apply for some reason, I don't know, and I just don't know what to say about it. But I don't like someone telling me that the book is wrong and the answer is STUPID. But if by chance he IS right, I would like to know that as well.

Being that he is the know-it-all type, I need to have something solid to be able to say "not only are YOU wrong (or right), but here's WHY you are wrong (or right)" . The book doesn't offer any explanation besides showing the formula used to reach the answer. And there is no other context provided for the question, what you see is what you get..

I will post the book answer and formula after I see some of your responses.

Thanks in advance for the help.



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