If an average home in your town currently costs $300,000, and house prices are expected to grow at an average rate of 5 percent per year, what will an average house cost in 10 years?
A) $450,000.00
B) $483,153.01
C) $488,688.39
D) $507,593.74

Question

Quizplus · Accepted Answer

To find the cost of an average house in 10 years, we need to use the formula for compound interest:

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

Where:
A = the future value (unknown)
P = the present value (in this case $300,000)
r = the annual interest rate (in this case 5%)
n = the number of times the interest is compounded per year (we'll assume once per year)
t = the number of years (in this case 10)

Plugging in the values, we get:

A = 300,000(1 + 0.05/1)^(1*10)
A = 300,000(1.05)^10
A = 488,688.39

Therefore, an average house in 10 years will cost $488,688.39.

If an Average Home in Your Town Currently Costs $300,000