Find the cost of a home in 20 years, assuming an annual inflation rate of 4%, if the present value of the house is $285,000. (Round your answer to the nearest cent.)
If $605 is invested in an account that earns 20.25%, compounded annually, what will the account balance be after 25 years? (Round your answer to the nearest cent.)
1.04^20 = 2.19
2.19*285,000 = 624,470
Now do
1.2025^25 *605
= 60,797
To find the future cost of a home in 20 years, we need to take into account the effect of inflation. Here's how we can calculate it step by step:
1. Calculate the inflation factor: The annual inflation rate is given as 4%. To calculate the inflation factor, we add 1 to the inflation rate and convert it to decimal form:
Inflation factor = 1 + (4% / 100) = 1 + 0.04 = 1.04
2. Calculate the future cost: Multiply the present value of the house by the inflation factor to find the future cost:
Future cost = Present value × Inflation factor
Future cost = $285,000 × 1.04 = $296,400
Therefore, the estimated future cost of the home in 20 years, assuming an annual inflation rate of 4%, is approximately $296,400.