Question

John bought a new home in 2002. The value of the home increases 4% each year. If the price of the house is $375,000 in 2020, how much did he pay for it in 2002?

Answer 1

Using the formula of P(1 + r)^n = x where p represents the initial value, r represents the rate and n represents the number of years and x is our final output. We want to find P so we have to make it the subject of the equation.

1 + 0.04 = 1.04
1.04^18 = 2.025816515
Then divide the total amount by this to get 185,110.5454
Therefore the answer is $185,110.55

Hope this helps! :)