Final answer:
To calculate the future value of the car that appreciates at 2.5% per year over 15 years, we use the compound interest formula. The formula yields a future value of approximately $94,785.23, which does not match any of the provided choices.
Step-by-step explanation:
The question asks to calculate the future value of a classic car with an annual increase in value of 2.5 percent over a span of 15 years. To solve this, we use the formula for compound interest:
FV = PV(1 + r)^n
Where:
- FV is the future value
- PV is the present value ($64,000)
- r is the annual interest rate (2.5% or 0.025)
- n is the number of years (15)
Substituting the given values in the formula, we get:
FV = $64,000(1 + 0.025)^15
FV = $64,000(1.025)^15
FV ≈ $64,000 * 1.481020507125 ≈ $94,785.23
This result is not matching the provided options, which indicates there may have been a miscalculation or a typo in the choices given. The concept and computation method are correct, and typically such a discrepancy should be clarified with the instructor or source of the question.