Question

A home’s value increases at an average rate of 5.5% each year. The current value is $120,000. What function can be used to find the value of the home after x years?

f(x) = 120,000(1.055x)
f(x) = 120,000(0.055)x
f(x) = 120,000(1.055)x
f(x) = [(120,000)(1.055)]x

Answer 1

Use the annual growth factor 1 + 0.055 = 1.055, so the value after x years is

f(x) = 120,000(1.055)^x.

(This is the exponential-growth option.)