# SOLUTION: Find the cost of a home in 20 years, assuming an annual inflation rate of 2%, if the present value of the house is \$260,000. (Round your answer to the nearest cent.)

Algebra ->  Algebra  -> Finance -> SOLUTION: Find the cost of a home in 20 years, assuming an annual inflation rate of 2%, if the present value of the house is \$260,000. (Round your answer to the nearest cent.)       Log On

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 Question 605680: Find the cost of a home in 20 years, assuming an annual inflation rate of 2%, if the present value of the house is \$260,000. (Round your answer to the nearest cent.) Answer by mathie123(224)   (Show Source): You can put this solution on YOUR website!Okay, we will first take a look at the first few years and then get our formula (and once you know the formula for these types of questions it will be a matter of putting the numbers in the formula after). If my house costs 260 000 and the inflation rate is 2%/year this means that next year my house will cost 260 000+260 000(0.02)=260 000 (1.02) Similarily, for the year after, it will cost 2% more than 260 000(1.02) This means it will cost 260 000(1.02)(1.02). We can go on and on but you will see that you will get where t is the number of years that have gone by . So we can now plug in t=20 into the above formula, use our calculator and get a value (I will leave this to you, hopefully you get a value that is larger than 260 000 seeing as the price is going upwards each year). Hopefully this helps a bit:)