If I want my rent in 4yrs to be 900dllrs. The owner of the apartment building told me that the rent will increase 3% every year compounded every year. What should be my rent today?

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asked by rosie
  1. The formula for compound interest (which this problem asks about) is:

    A = P(1+(r/n))^(nt)

    Where A is the amount you end with, P is the original/beginning amount, r is the interest rate, n is the number of times interest is compounded, and t is the number of years. So because n = 1, this is what you'll be working with:

    A = P(1+r)^t

    You'll be solving for P because you want to know what rent should be at the beginning of the lease. So the formula should be rearranged as follows:

    P = A/((1+r)^t)

    All I did was solve the formula for P.

    Now A = $900, r = 0.03, and t = 4.

    Plug and solve and you'll have your answer.

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    posted by Jason
  2. 710.78 to the nearest cent: 710.79 either one will be correct.

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    posted by rosie

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