Question

What will a $200,000 house cost 4 years from now if the price appreciation for homes over that period averages 7% compounded annually?

a) $229,866.83
b) $214,000.00
c) $240,790.08
d) $186,499.24

Answer 1

To calculate the future cost of a $200,000 house after 4 years with an average price appreciation of 7% compounded annually, the formula for compound interest can be used. The future cost of the house would be $229,866.83.

Step-by-step explanation:

To calculate the future cost of a $200,000 house after 4 years with an average price appreciation of 7% compounded annually, you can use the formula for compound interest: A = P(1 + r/n)^(nt). In this case, P is the initial price of the house ($200,000), r is the interest rate (7% or 0.07), n is the number of times the interest is compounded per year (1 since annually), and t is the number of years (4).

Using the formula, the future cost of the house would be: A = $200,000(1 + 0.07/1)^(1*4) = $229,866.83.

Therefore, the correct answer is a) $229,866.83.