Gen. Robert E. Lee’s Boyhood Home is for Sale

Gen. Robert E. Lee’s Boyhood Home is for Sale

The historic Virginia home that Confederate Gen. Robert E. Lee grew up in hit the market (in April 2018) for $8.5 million. (Trapasso, C.)

Robert E. Lee’s father Henry rented the home in 1812, according to The Washington Post. The family lived there for over 80 years, including Robert E. Lee from age five to when he went to West Point in 1825. He again visited five years after the Civil War ended, The Post reported. (Leayman, E.)

The home’s other claim to fame is that President George Washington also dined and lodged there before the Lee family moved in. (Trapasso, C.)

Built in 1795, the brick house was listed on the National Register of Historic Places in 1986. (Trapasso, C.)

The home had been used as a residence until 1966. The Stonewall Jackson Memorial Foundation purchased the home and opened it to the public. Unable to make ends meet, the foundation sold the home in 2000 to Mark and Ann Kington for $2.5 million. (Trapasso, C.)

The boyhood home of Robert E. Lee in Alexandria was listed on the market with a significant price drop. Previously priced at $8.5 million, the six bedroom is available for $6.2 million (March 2019). (Leayman, E.)

 

References

Leayman, E. (2019, March 26). Robert E. Lee Boyhood Home Listed for Reduced Price. Retrieved April 2, 2019, from https://patch.com/virginia/oldtownalexandria/robert-e-lee-boyhood-homes-listed-reduced-price

Trapasso, C. (2018, April 3). Own Some Civil War-Era History: Gen. Robert E. Lee’s Boyhood Home is for Sale. Retrieved April 2, 2019, from https://www.realtor.com/news/unique-homes/general-robert-e-lees-boyhood-home-sale/

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In your initial response to the topic you have to answer  all  questions.

1. Calculate the annual compound growth rate of the house price since the house was sold to Mark and Ann Kington (since 2000) until the house was listed for sale at a reduced price in 2019. (Round the number of years to the whole number).  Please show your work.

2. Assume that the growth rate you calculated in question #1 remains the same for the next 30 years. Calculate the price of the house in 30 years after it was listed at a reduced price in 2019.  Please show your work.

3. Assume that the growth rate you calculated in question #1 remains the same since Robert E. Lee’s father Henry rented the home in 1812. Calculate the price of the house in 1812. (Round the number of years to the whole number).  Please show your work.

4. Assume the growth rate that you calculated in #1 prevailed since 1795. Calculate the price of the house in 1795. (TIP: To get the answer correctly you need to use the price of the house in your calculations in dollars with all zeros).   Please show your work.

5. You were using the time value of money concept to answer question #4. Think about the time line for that problem. What is the time point 0 in that problem?  Please explain your answer.

6. In April 2018, the listed price of the house was $8.5 million. Calculate the annual compound growth rate of the house price since the house was sold to Mark and Ann Kington (since 2000) until the house was listed for sale in 2018. Compare with your answer to the question #1.

7. Using the growth rate from question #6, calculate the price of the house in 1812. (Round the number of years to the whole number).  Please show your work.  Compare with your answer to the question #3.

8. Reflection – the students also should include a paragraph in the initial response in their own words reflecting on specifically what they learned from the assignment and how they think they could apply what they learned in the workplace.

 

Practice Exercise 1. a. If you deposit $1,000 in a savings bank account that earns 3%, compounded annually, how much money will you have at the end of 10 years?

Solution: $1,343.90 (math solution)

This is a future-value problem that can be solved using three approaches, the mathematical formula, the financial calculator, or the financial tables.

Detailed solution:

Formulas

1. Math                           FVn= PV(1+ i)n

2. Financial calculator    (Same as math solution)

3. Financial tables          FVn= PV(FVIFi,n)

where:

FVn  = Future value at year n = unknown PV    = Present-value amount = $1,000 i        = Interest rate = 3% or (0.03) n       = Number of years = 10

Alternative solution methods:

1. Math                FV10 = $1,000(1 + .03)10                                 FV10 = $1,000(1.03)10                                 FV10 = $1,000(1.3439)10                                 FV10 = $1,343.90

2. Financial calculator    FV10 = $1,000(1 + .03)10

Setup     N =10 I/Y             = 3 PV             = –1,000 PMT          = 0 CPT Used to compute FV solution FV             = $1,343.92

3. Financial tables     FVn  = PV(FVIF i,n)                             FV10 = $1,000(FVIF3,1)                             FV10 = $1,000(1.344)  (compound-value tables)                             FV10 = $1,344.00

Note the subtle differences in the solutions provided by the various approaches. These are normal and caused by rounding differences because of various methods of carrying different significant digits. Each answer is 100% correct for the method us

b. What is the present value to you of an investment that yields $10,000 five years from today, if your personal discount rate is 5%?

Solution: $7,835.15 (math solution)

This is a present-value problem that can be solved using three approaches, the mathematical formula, the financial calculator, or the financial tables.

Detailed solution:

Formulas

1. Math                           PV = FVn= [1/(1+ i)n]

2. Financial calculator    (Same as math solution)

3. Financial tables          PV = FVn(PVIFi,n)

where:

PV    = Present-value amount   = unknown FVn  = Future value at year n   = $10,000 i        = Discount rate               = 5% or (0.05) n       = Number of years          = 5

Alternative solution methods:

1. Math                PV = $10,000[1/(1 + .05)5]                                 PV = $10,000[1/(1.05)5]                                 PV = $10,000[1/1(1.2763)]                                 PV = $7,835.15

2. Financial calculator    FV10 = $1,000(1 + .05)5]

Setup   N       = 5             I/Y     = 5             FV     = 10,000             PMT  = 0             CPT     Used to compute PV solution             PV     = $7,835.26

3. Financial tables     PV = FVn(PVIF i,n)                             PV = $10,000(FVIF5,5)                             PV = $10,000(0.784)  (Present-value tables)                             PV = $7,840.00

Note the subtle differences in the solutions provided by the various approaches. These are normal and caused by rounding differences because of various methods of carrying different significant digits. Each answer is 100% correct for the method used.

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