Question

3) Lane and Zack purchased a house for $245,000 in 2016. The house loses 4% of its value each year,

Part A: How much will Lane & Zack's house be worth in 2030?
I need help on how to go by on this problem

Answer 1

$138,345

Explanation:

This is a compound decline problem, which will be solve by the compound formula:

`F=P(1-r)^t`

Where

F is the future value (value of house at 2030, 14 years from 2016)

P is the present value ($245,000)

r is the rate of decline, in decimal (r = 4% = 4/100 = 0.04)

t is the time in years (2016 to 2030 is 14 years, so t = 14)

We substitute the known values and find F:

`F=P(1-r)^t\\F=245,000(1-0.04)^(14)\\F=245,000(0.96)^(14)F=138,344.96`

Rounding it up, it will be worth around $138,345 at 2030