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August 29, 2014

August 29, 2014

Posted by **sandra** on Thursday, July 9, 2009 at 3:16pm.

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.

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**Marth**, Thursday, July 9, 2009 at 3:32pmUse 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

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**Alyssa**, Thursday, July 9, 2009 at 3:36pmI 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! :)

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**Marth**, Thursday, July 9, 2009 at 3:44pm230,000*e^(.06*21) does not equal 289,800. You forgot about the e.

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**sandra**, Thursday, July 9, 2009 at 4:42pmWell 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????

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**Reiny**, Thursday, July 9, 2009 at 4:53pmJust use the compound interest formula,

Amount = princ(1+i)^n

amount = 230000(1.06)^21

= 781899.63

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**Reiny**, Thursday, July 9, 2009 at 4:55pmMarth's formula is used for "continuous" rate of interest.

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**sandra**, Thursday, July 9, 2009 at 5:06pmSo 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.

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**Reiny**, Thursday, July 9, 2009 at 5:22pmno,

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

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**sandra**, Thursday, July 9, 2009 at 5:26pmYeah 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.

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**femstar**, Sunday, October 31, 2010 at 6:01pm1. 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:

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