Bob's house has doubled in value since he bought it 30 years ago. The house's value has increased by an annual rate of
A) 2.34%.
B) 3.33%.
C) 6.67%.
D) 100%.

Question

Quizplus · Accepted Answer

The house doubling in value over 30 years corresponds to an annual compound growth rate. Using the formula for compound interest, $A = P(1 + r)^n$, where $A$ is the final amount, $P$ is the principal amount (initial value), $r$ is the annual rate of increase, and $n$ is the number of years, we can solve for $r$ given that $A/P = 2$, $n = 30$. Rearranging the formula gives $2 = (1 + r)^{30}$. Solving for $r$ gives an approximate rate of 2.34% per year.

Bob's House Has Doubled in Value Since He Bought It