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March 26, 2017

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The Estradas are planning to buy a house 5 years from now. Housing experts in their area have estimated that the cost of a home will increase at a rate of 3%/year during that 5-year period. If this economic prediction holds true, how much can the Estradas expect to pay for a house that currently costs $500,000? (Round your answer the the nearest dollar.)

  • Calculus - ,

    what is
    500000(1.03)^5 ?

  • Calculus - ,

    Are they paying in cash?

    The cost in dollars in five years will be 500,000(1.03)^5

    But the real cost is dependent on the inflation rate (ie,how much less is a dollar worth in 5years, how much income will increase), and then, what will be the interest rates available in 5 years..Few folks pay cash for houses.

  • Calculus - ,

    Paying in cash. Thank you!

  • Calculus - ,

    Doing homework with James, thanks!

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