Question

Assume in a certain city that housing costs have been increasing at 5.2% per year compounded annually for the past 8 years. A house worth $260,000 today would have had what value 8 years ago?

Answer 1

Answer:

$\ 173,319.50$  

Step-by-step explanation:

we know that    

The compound interest formula is equal to  

$A=P(1+\frac{r}{n})^{nt}$  

where  

A is the Final Investment Value  

P is the Principal amount of money to be invested  

r is the rate of interest  in decimal

t is Number of Time Periods  

n is the number of times interest is compounded per year

in this problem we have  

$t=8\ years\\ A=\ 260,000\\ r=5.2\%=5.2/100=0.052\\n=1$  

substitute in the formula above

$260,000=P(1+\frac{0.052}{1})^{1*8}$  

solve for P

$260,000=P(1.052)^{8}$  

$P=260,000/(1.052)^{8}=\ 173,319.50$