Question

Rentals in a high rise apartment building get more expensive higher up, since the views get better. The ground floor (floor 0) rent is $2,000.00. The rent increases 4% per floor . What is the rent on the 7th floor ?

A) 2000 x 1.08^7 ≈ $3,427.65
B) 2000 x 1.01^7 ≈ $2,144.27
C) 2000 x 1.04^7 ≈$2,631.86
D) 2000 x 1.02^7 ≈$2,297.37

Answer 1

C

Explanation:

so, I assume the rent on floor x increases 4% compared to the rent on floor x-1.

and not by x×4% compared to floor 0.

because otherwise there would be no correct answer option.

if my assumption is correct, then C is correct.

with every floor we add 4% to the rent of the previous floor. that means we multiply the rent of the previous floor by 1.04.

so, for the 7th floor we multiplied by 1.04 seven times.

FYI - if we simply added 4% of the rent of floor 0 to every floor, we would then add 4×7 = 28% to the rent on the 7th floor.

and that would mean a rent of

2000 × 1.28 = $2,560

there you see the difference between simply adding a constant % and adding % of %.