Question

Calculating the future value of property: Ben Collins plans to buy a house for $220,000. If that real estate is expected to increase in value by 3 percent each year, what will its approximate value be seven years from now?

Answer 1

Answer: $270572.25

Explanation:

The formula to calculate the Future value is given by :-

`FV=PV(1+r)^t`, where PV is the presents value , r is the rate of growth ( in decimal) and t is the time period ( in years).

Given :- Present value of house : PV=$220,000

Rate of growth : r= 3%=0.03

Now, the value after t=7 years from now will be :-

`FV=(220000)(1+0.03)^(7)\\\\\Rightarrow\ FV=(220000)(1.03)^7\\\\\Rightarrow\ FV=220000*1.22987386542\\\\\Rightarrow\ FV=270572.250392\approx270572.25`

Hence, the its approximate value will be =$270572.25

Answer 2

FUTURE VALUE = PRESENT VALUE * (1 + r)^t

PV = 220,000
r = 3%
t = 7 years

FV = 220,000 * (1 + 3%)^7
FV = 220,000 * (1.03)^7
FV = 220,000 * 1.22987386542487
FV = 270,572.25