Question

Mr garcia purchased a property 3 years ago for $155,750.00.The market has growth rate of 3.75% compounded monthly. What is the current value of the property?

Answer 1

Mr. Garcia purchased a property 3 years ago for $155,750.00

So, number of years = 3 and Initial amount = $155,750.00

The market has a growth rate of 3.75% compounded monthly.

So, interest rate = 3.75% and the number of times compounded in a year = 12

What is the current value of the property?​

Recall that the compound interest formula is given by

$A=P(1+\frac{r}{n})^{nt}$

Where

A = Future value (current value in this case)

P = Principle value (initial value = $155,750.00)

r = interest rate (growth rate in this case)

t = number of years (3 years in this case)

n = number of times compounding is done in a year (monthly means n = 12)

Let us substitute the given values into the above formula

$\begin{gathered} A=155,750(1+\frac{0.0375}{12})^{12\cdot3} \\ A=155,750(1+0.003125)^{36} \\ A=155,750(1.003125)^{36} \\ A=155,750(1.11887) \\ A=\ 174,264.00 \end{gathered}$

Therefore, the current value of the property is $174,264.00