Your goal is to build your ﬁrst home seven years from now. The home that you desire currently costs $215,900. New home prices are increasing by 4.2% annually. If home prices continue rising at
That pace, how much will your home cost when you are ready to build seven years from now?
A) $281,113.21
B) $284,109.67
C) $287,956.36
D) $292,001.06
E) $295,474.06

Question

Quizplus · Accepted Answer

To calculate the future cost of the house, we need to use the formula for compound interest:

A = P(1 + r/n)^(nt)

Where A is the future cost, P is the present cost, r is the annual interest rate (4.2%, or 0.042), n is the number of times interest is compounded per year (assuming annually, so n = 1), and t is the number of years (7).

Plugging in the values, we get:

A = 215,900(1 + 0.042/1)^(1*7) 
A = 287,956.36

Therefore, the best choice is C, as it matches the calculated future cost.

Your Goal Is to Build Your ﬁRst Home Seven Years