Question

Gareth bought a home for $135,000. The home gained 2. 2% in value every year for eight years until Gareth sold it. How much profit did Gareth make, to the nearest hundred dollars? a. $60,700 b. $25,700 c. $23,800 d. $29,100.

Answer 1

The amount of profit made by Gareth upon the sale of the home is $26,700.

Computation:

Given,

$P$ = Principal Amount of $135,000

$i$ = interest rate of 2.20%

$n$ =number of years are 8 years

First, the value of the home at the end of the 8th year will be computed by using the formula of future value.

$\begin{aligned}\text{Future Value}&=P\times(1+i)^n\\&=\ 135,000\times(1+0.022)^8\\&=\ 160,672.27\end{aligned}$

Now, the profit will be computed by taking the difference of the future value of the home and the purchase price or the principal amount of the home.

$\begin{aligned}\text{Profit}&=\text{Future Value\;-\;Principal Amount}\\&=\ 160,672.27-\ 135,000\\&=\ 25,672.27\;\text{or}\;\ 25,700\end{aligned}$

Therefore, at the time of sale of the home, the amount of profit gained by Gareth is $25,700.

To know more about future value, refer to the link:

brainly.com/question/1759639