Question

Wilson is thinking about buying a house. The table below shows the projected value of two different houses for three years.

Answer 1

Given:
                 Number of years 1               2            3 
House 1 (value in dollars) 249,000 253,980 259,059.60
House 2 (value in dollars) 249,000 256,000 263,000

House 1: exponential function
House 2: linear function

House 1: f(x) = 249,000 * (1.02)^(x-1)
→ f(3) = 249,000 * (1.02)³⁻¹ = 249,000 * (1.02)² = 259,059.60

House 2: f(x) = 249,000 + 7,000(x-1)
→ f(3) = 249,000 + 7,000(3-1) = 249,000 + 7,000(2) = 249,000 + 14,000 = 263,000

House 1: 
f(45) = 249,000 * (1.02)⁴⁵⁻¹ = 249,000 * (1.02)⁴⁴ = 249,000 * 2.39 = 595,110

House 2:
f(45) = 249,000 + 7,000(45-1) = 249,000 + 7,000(44) = 249,000 + 308,000 = 557,000

House 1 will have a greater value than House 2 after 45 years.