Question

The Poe family bought a house for $240,000. If the value of the house increases at a rate of 4% per year, about how much will the house be worth in 20 years?

Answer 1

Answer:

  about $525,900

Step-by-step explanation:

Each year, the value is multiplied by (1 +4%) = 1.04. After 20 years, it will have been multiplied by that value 20 times. That multiplier is 1.04^20 ≈ 2.19112314.

The value of the house in 20 years will be about ...

  $240,000×2.19112314 ≈ $525,900 . . . . . rounded to hundreds

Answer 2

Answer: it would be worth $52587 in 20 years.

Step-by-step explanation:

If the value of the house increases at a rate of 4% per year, then the rate is exponential. We would apply the formula for exponential growth which is expressed as

A = P(1 + r/n)^ nt

Where

A represents the value of the house after t years.

n represents the period of increase.

t represents the number of years.

P represents the initial value of the house.

r represents rate of increase.

From the information given,

P = $24000

r = 4% = 4/100 = 0.04

n = 1 year

t = 20 years

Therefore

A = 24000(1 + 0.04/1)^1 × 20

A = 24000(1.04)^20

A = $52587