Question

Real estate values in a town are increasing at a rate of 7% per year. Ms. Keene purchased a building for $245,000 in 2015. How much can she expect to sell the building for in 2020, assuming this trend continues? Enter your answer in the box. Round to the nearest whole dollar.

Answer 1

This is an exponential growth problem.

The formula for this is:

y = a(1+rate)^time

a = the starting value = 245,000

Rate is the percent of increase written as a decimal = 7% = 0.07

Time would be the number of years from the starting year to the year you are trying to find: 2020 - 2015 = 5 years

Now you have y = 245000(1 + 0.07)^5

Simplify:

245000(1.07)^5

Calculate:

New value = $343,625

Explanation:

Answer 2

This is an exponential growth problem.

The formula for this is:

y = a(1+rate)^time

a = the starting value = 245,000

Rate is the percent of increase written as a decimal = 7% = 0.07

Time would be the number of years from the starting year to the year you are trying to find: 2020 - 2015 = 5 years

Now you have y = 245000(1 + 0.07)^5

Simplify:

245000(1.07)^5

Calculate:

New value = $343,625