What is the value of a home that costs 121,000 in 18 years at 4% interest
To calculate the future value of an investment with compound interest, we can use the formula:
FV = PV * (1 + r)^n
Where:
FV = Future Value
PV = Present Value (the initial cost of the home)
r = Annual interest rate (expressed as a decimal)
n = Number of years
In this case, the Present Value (PV) is $121,000, the interest rate (r) is 4% (0.04 as a decimal), and the number of years (n) is 18.
To calculate the Future Value (FV), we substitute the given values into the formula:
FV = $121,000 * (1 + 0.04)^18
Let's now calculate the value step by step:
1. Add one (1) to the interest rate:
1 + 0.04 = 1.04
2. Raise this result to the power of the number of years:
1.04^18 ≈ 1.838
3. Multiply the result by the present value:
$121,000 * 1.838 ≈ $222,418.00
Therefore, the estimated value of the home in 18 years at a 4% interest rate would be approximately $222,418.