Question

You purchase a home for $125,000. The value of the property increases by 1.9% every year. After ten years, you decide to sell the home. In the meantime, you have made renovations and improvements to the house which increase its sale value by $48,300. How much will you sell the house for, to the nearest hundred dollars?
a.
$257,500
b.
$209,200
c.
$150,900
d.
$199,200

Answer 1

Compute the future value with annual compounding, then add the improvements:

Value after 10 years = 125,000*(1.019)^10 ≈ 125,000*(1.207095) ≈ 150,886.93
Sale price = 150,886.93 + 48,300 = 199,186.93

Rounded to the nearest hundred: $199,200. Answer: d.