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math

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An antique dresser was purchased for $7500 in 2005. The dresser increases in value by 9% per year. Find the value of the dresser in 2025.

So i thought it would be :
A = 7500(1+0.09)^(20)
A = 42033...

However I have been told it could be:

Value = 7500 + 7500*0.09*20 = $21,000

Which is the correct method?

  • math -

    the first method uses compound interest which would be the normal way of doing it.
    The second uses simple interest, a method used for very short periods of time and certainly does not fit into a 25 year period

    I would be my money on
    A = 7500(1+0.09)^(20)

  • math -

    Thank you very much.

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