Problema Solution
The Kwans are planning to buy a house 6 years from now. Housing experts in their area have estimated that the cost of a home will increase at a rate of 6%/year during that period. If this economic prediction holds true, how much can the Kwans expect to pay for a house that currently costs $160,000
Answer provided by our tutors
we know the present value
PV = $160,000
r = 0.06 or 6% per year
n = 6 years
we need to find the future value FV after 6 years
FV = PV (1 + r)^n
FV = 160000(1 + 0.06)^6
FV = $226,963.06
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the Kwan should expect to pay $226,963.06.