Question

A home has a current market value of $225,000. MLS data from the last five years shows that home values have appreciated 6% per year. Based on this information, what will be the value of the house 5 years from now assuming compound appreciation?

Answer 1

THe value after 5 years will be $301100.755

Explanation:

Each year the houses appreciates a 6%; as a result, the price of the house is multiplied by 1.06 for each passing year. If 5 years passed, then the price would multiply for 1.06 a total of 5 times, hence it will be multiplied by 1.06⁵.

The value of the house after 5 years will be

225000*1.06⁵ = $301100.755