Find the cost of a home in 20 years, assuming an annual inflation rate of 2%, if the present value of the house is $280,000. (Round your answer to the nearest cent.
To find the cost of a home in 20 years, accounting for inflation, we need to calculate the future value using the present value and the inflation rate. The future value formula is given by:
Future Value = Present Value * (1 + Inflation Rate/100)^Number of Years
In this case, the present value of the house is $280,000, the inflation rate is 2%, and we want to find the cost in 20 years.
Plugging in these values into the formula:
Future Value = $280,000 * (1 + 2/100)^20
Now, let's solve this calculation:
Future Value = $280,000 * (1 + 0.02)^20
Future Value = $280,000 * (1.02)^20
Using a calculator or a spreadsheet, we find:
Future Value ≈ $359,677.95
Therefore, the cost of the home in 20 years, assuming an annual inflation rate of 2%, is approximately $359,677.95.