Question

Gareth bought a home for $135,000. The home gained 2.2% in value every year for eight years until Gareth sold it. How much profit did Gareth make, to the nearest hundred dollars?
Answers:
a. $60,700

b. $25,700

c. $23,800

d. $29,100

Answer 1

We are given with
Present worth = $135000
Interest rate = 2.2% (assume effective)
Time = 8 years

The future worth is
F = 135000 (1 + 0.022)^8
F = 160672.27

The profit is
$160672.27 - $135000 = $25672.27

The closest answer is
b. $25,700