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.
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
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! :)
230,000*e^(.06*21) does not equal 289,800. You forgot about the e.
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????
Just use the compound interest formula,
Amount = princ(1+i)^n
amount = 230000(1.06)^21
= 781899.63
Marth's formula is used for "continuous" rate of interest.
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.
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