Question

If the house you are looking at currently costs ​$160 comma 000 and is expected to increase in value each year at a rate of 3 ​percent, what will the value of the house be when you retire in 6 ​years?

Answer 1

Answer:

A = $ 191 048.36

Explanation:

In this case of rate over rate, in other words, the continous house valuation. The compound interest can be applied as follows:

$A = P(1+\frac{r}{n}) ^{nt}$ eq 1

A = final amount

P = initial principal balance

r = interest rate

n = number of times interest applied per time period

t = number of time periods elapsed

By replacing the values from the exercise into the equation I, we have:

$A = 160 000(1+\frac{0.03}{1}) ^{1*6}$

A = $ 191 048.36