Question

A small parcel of lot in a rural area costs $50,000 in 1980. if the value of the lot appreciates by 20% every 10 years, how much would the lot be in 2020?

a) $86,400
b) $103,680
c) $124,416
d) If the correct answer is not among the choices, write the correct one.

Answer 1

b) $103,680.

Explanation:

The value each year is 120 % of the previous 10 years.

120 % = 1.2 so we have the equation

V = 50,000(1.2)^n where n is the number of 10 year increments after 1980.

In 2020 4 ten year periods have elapsed so the answer is:

V = 50,000(1.2)^4

= $103,680.