Question

I can not solve this problem it's kind of hard for me can anyone please help me out. Thanks

1.If inflation is 6% a year compounded annually, what will it cost in 21 years to buy a house currently valued at $230,000? Round to the nearest cent.

Answer 1

Use the equation A = Pe^(rt), where A is the final value, P is the initial value, r is the rate, and t is time.

The time is 21 years, the rate is .06% per year, and the initial value is $230,000.

Therefore, we have
A = 230,000*e^(.06*21)
A = $810,846.94

Answer 2

I don't know...That doesn't look correct. I got this:

A = 230,000*e^(.06*21)
= 289,800
NOW we add that to the 230,000 to get

A = 519,800???? I think this makes more sense? Any thoughts? ThankS! :)

Answer 3

230,000*e^(.06*21) does not equal 289,800. You forgot about the e.

Answer 4

Well you see that is what I did and but still don't come up with the answer these are my answer options.

A)$427,867.75
B)$737,641.16
C)$828,813.61
D)$781,899.63
I even did this since there are 12mths in a year I mult. 12 by 21 which I got 252. So what is the answer though????

Answer 5

Just use the compound interest formula,
Amount = princ(1+i)^n

amount = 230000(1.06)^21
= 781899.63

Answer 6

Marth's formula is used for "continuous" rate of interest.

Answer 7

So what you did was mult. 230,000 by 1.06 right which I got 368000. But from there what do I do did you mult. 368000 by 21? I'm lost in that step right there.

Answer 8

no,
follow the order of operation, the power has to be done first

do (1.06)^21 on your calculator to get
3.3995636 , then multiply by 230000

Answer 9

Yeah I already figured it out thank you. I was wondering how you did it solved the problem I was getting fusterated b/c I tried it so many ways and I just wouldn't come up with an answer, I was way off the mult. choice. Once again thanks.

Answer 10

1. Find the amount of time to the nearest day that it would take for a deposit of $1000 to grow to $500,000 at 10% compounded continuously. The equation for continuous compounding is given below: