Heather and Joel bought a house for $157,200 and know that the house appreciates every year. They keep track of their house value for 5 years and model their data with the exponential equation
Given that they want to estimate the cost of the house after 8 years, the best equation will be obtained as follows: FV=P(1+r)^n where: n=time p=principle r=rate First we need to estimate the rate. The value of the house after 5 years is $ 190,000 thus plugging the values in the equation and solving for r we get: 190000=157200(1+r)^5 1.20865=(1+r)^5 getting the fifth root of both sides we obtain: 1.0386=1+r thus r=0.0386~3.86% thus the value of the house after 8 years will be: FV=157200(1.0386)^8 FV=$212,879.6936
