Question

Ben Collins plans to buy a house for $286,000. If that real estate is expected to increase in value by 4 percent each year, what will its approximate value be seven years from now? Use Exhibit 1-A. (Round time value factor to 3 decimal places and final answer to the nearest whole number.)

Answer 1

376,376

Explanation:

This is same as computing compund interes and accrued valu given a rate of interest

Formula is

A = P(1 + r/100)^n where

P = initial value, r = interest in percent, n= number of years

A = 286000 x (1.04)^7

1.04^7 =1.316 to 3 decimal places

286000 x 1.316 = 376,376