Question

A diamond ring increases in value at a rate of 5% per year. If the ring was purchased for $1200, which equation would calculate how much will it be worth in 30 years?

Would it be

A - y = 1200(1+.05)^30

B - y = 30(1+.05)^1200

C - y = .05(1+1200)^30

Answer 1

A - y = 1200(1+.05)^30

Explanation:

In this case, you need to calculate the future value and the formula to calculate that is:

FV=PV*(1+r)^n

FV=future value

PV=present value

r=rate

n=number of periods of time

The present value would be the price of the ring which is $1200. The rate is 5% per year and the number of periods of time is 30 years since you need to find the ring's worth in 30 years. Now, you can replace the values on the formula:

FV=1200*(1+0.05)^30

According to this, the answer is that the equation to calculate how much will it be worth in 30 years is: y = 1200(1+.05)^30.