Question

Yacouba purchased a three bedroom house in Kingwood, TX for $185,000. Housing prices are expectedto increase 2.1% annually.What would be the value of the house after 15 years?

Answer 1

This is a compound amount with a starting value of $185,000.

Prices are expected to rise at a rate of 2.1%

The formula to obtain the new value at any later time t in years is;

`A=P(1+(r)/(100))^t`

We can insert the known values to get ;

`\begin{gathered} A=185,000(1+(2.1)/(100))^(15) \\ =185,000(1.021)^(15) \\ A=\text{ \$252,672.4} \end{gathered}`

Therefore, the value of the house after 15 years is $252,672.4 Option D