Question

Real estate values in a town are increasing at a rate of 9% per year.

Mr. Townsend purchased a building for $375,000 in 2010.


How much can he 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

In 2020 building price is $ 887761

Explanation:

Time = 2020 - 2010 = 10 years

In 2011 building price = 375000 ×
`(9)/(100)` + 375000 =$408750

In 2012 building price = 408750 ×
`(9)/(100)` + 408750 =$445537.5

In 2013 building price = 445537.5 ×
`(9)/(100)` + 445537.5 =$485635.88

In 2014 building price = 485635.88 ×
`(9)/(100)` + 485635.88 = $529343.11

In 2015 building price = 529343.11 ×
`(9)/(100)` + 529343.11 = $576983.99

In 2016 building price = 576983.99 ×
`(9)/(100)` + 576983.99 =$628912.55

In 2017 building price = 628912.55 ×
`(9)/(100)` + 628912.55 =$685514.68

In 2018 building price = 685514.68 ×
`(9)/(100)` + 685514.68 = $747211

In 2019 building price = 747211 ×
`(9)/(100)` + 747211 =$814459.99

in 2020 building price = 814459.99 ×
`(9)/(100)` + 814459.99 =$887761.38 ≈ $887761

Second method

Total time(t) = 10 years

Rate(r) = 9%

Principal value = $375000

Now,

selling price (in 2020) = principal value
`(1+(r)/(100)) ^(t)`

= 375000
`(1+(9)/(100) )^(10)` = $887761.38 ≈$887761