Question

A new home was purchased for $920, 000 and has been increasing in value at a rate of 2% per year. Write an equation for an exponential function f(t) that models the value of the new home.

Answer 1

Value = 920, 000 x (1.02)^t

Explanation:

first year, the value of the home is 920, 000 + 2% of 920,000

2% of 920,000 is 18,400

920,000 + 18,400 = $938,400

second year the value is 938, 400 + 2% of 938, 400

2% of 938, 400 is 18,768

938,400 + 18,768 = $957,168

and the pattern goes the same

we can model this scenario as

Value = 920,000 x (1.02)^t where t represents the year

for example, find the value of the home after 5 years

Value = 920,000 x (1.02)^5

Value = 920,000 x 1.1040808...

Value = $1, 015, 754.339