The price of a house increases every year by 20%. If the present price is Rs. 720000, then what was its price (in Rs.) 2 years ago?

Options

A. 500000
B. 550000
C. 450000
D. 580000

Answer

To find the price of the house 2 years ago, we need to work backward from the current price, taking into account the annual increase of 20%.

### Step-by-step Solution:

1. **Identify the Current Price**:
The current price of the house is Rs. 720,000.

2. **Understand the Percentage Increase**:
The house price increases by 20% each year. This means that the price after one year can be calculated using the formula:
\[ \text{New Price} = \text{Old Price} \times (1 + \text{Percentage Increase}) \]
Here, the percentage increase is 20%, or 0.20 in decimal form.

3. **Calculate the Price One Year Ago**:
Let \( P \) be the price one year ago. The relationship can be expressed as:
\[ 720,000 = P \times (1 + 0.20) = P \times 1.20 \]
To find \( P \), we rearrange the equation:
\[ P = \frac{720,000}{1.20} \]
Now, calculate \( P \):
\[ P = \frac{720,000}{1.20} = 600,000 \]

4. **Calculate the Price Two Years Ago**:
Now, we need to calculate the price two years ago. Let \( P_2 \) be the price two years ago. Using the same formula:
\[ 600,000 = P_2 \times 1.20 \]
Rearranging gives:
\[ P_2 = \frac{600,000}{1.20} \]
Now, calculate \( P_2 \):
\[ P_2 = \frac{600,000}{1.20} = 500,000 \]

5. **Final Answer**:
The price of the house 2 years ago was Rs. 500,000.

### Summary:
The price of the house 2 years ago was Rs. 500,000.

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