Question

You have inherited land that was purchased for $25,000 in 1970. The value of the land has appreciated by

approximately 4% per year. What was the value of the land in the year 2000?
(a) Write the exponential function for this scenario:
(b) What was the value of the land in the year 2000? Round to the nearest whole dollar.
A. $750,000
B. $605,035,808
C. $81,084
D. $7,346

Answer 1

Future value of land = 25,000[1.04]³⁰

Future value of land = $81,084 (Approx.)

Explanation:

Given:

Purchase cost of land in 1970 = $25,000

Application rate = 4% per year

Find:

Price of land in 2000

Computation:

Number of year = 2000 - 1970 = 30 year

Future value of land = [Purchase cost of land][1+Application rate]ⁿ

F = P[1+r]ⁿ

Future value of land = 25,000[1+4%]³⁰

Future value of land = 25,000[1+0.04]³⁰

Future value of land = 25,000[1.04]³⁰

Future value of land = 25,000[3.24339]

Future value of land = 81,084.75

Future value of land = $81,084 (Approx.)