algebra

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Find the cost of a home in 20 years, assuming an annual inflation rate of 5%, if the present value of the house is $260,000.

  • algebra -

    What an outdated question! Housing prices have not been rising in the last several years.

  • algebra -

    clarification question: is this simple interest or compound interest? In other words, does it increase by a steady amount of money (so like maybe 2000 dollars per year) or does it increase by 1.05 of the money you have now? (so the next year would be 1.05, and the year after that would be 1.05^2)

  • algebra -

    Yup that is right Ms. Sue because of our bad economy...

  • algebra -

    inflation is an exponential concept, so the interest would be compound interest.

    amount = 260000(1.05)^20 = 689,857.40

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