Answer:
3.3 years
Step-by-step explanation:
Let the price of the house when it is being sold be = x
The Annual return received from the fund after a year that house is being sold is : A - P
where ;
P = current market price
A = price after one year
A is given by the formula:
where ; P = x
r = 8.5% = 0.085
n = 12
t = 1
A = 1.08839 x
The annual return is A - P = 1.08839 x - x
= 0.08839x
However, the house should be sold when this return is equivalent to the annual increase in value of the house
∴ 0.08839x = 31250
Thus , the current price (x) = $353546.78
Profit till that time = Current price - Initial Price
= (353546.78- 250000)$
= $103546.78
The time taken for this much profit to accumulate =
=
= 3.3135
≅ 3.3 years ( to one decimal place)