Edie Morgan plans to buy a house for $272,000. If the real estate in Edie’s area is expected to increase in value 3 percent each year, what will its approximate value be seven years from now? Use Exhibit 1-A.

Note: Round your FV factor to 3 decimal places and final answer to the nearest whole dollar.



To determine the future value (FV) of the house, we will use the formula for compound interest, which is:

\[
FV = P \times (1 + r)^t
\]

Where:
- $ P $ is the present value of the house (the current price, which is \$272,000),
- $ r $ is the annual rate of increase (3% or 0.03),
- $ t $ is the number of years (7 years).

Now, let's calculate the future value:

\[
FV = 272,000 \times (1 + 0.03)^7
\]

I'll calculate this.The approximate value of the house after 7 years will be \$334,526.

Would you like more details or further explanations?

Here are 5 related questions to deepen your understanding:
1. How would the value change if the annual increase was 4% instead of 3%?
2. What would the value be after 10 years instead of 7?
3. How does compound interest differ from simple interest in this scenario?
4. How could inflation affect the future purchasing power of the house?
5. What is the importance of rounding the future value factor in long-term projections?

**Tip**: Small differences in the percentage rate can significantly impact long-term growth due to the power of compounding.

Edie Morgan plans to buy a house for $272,000. If the real estate in Edie’s area is expected to increase in value 3 percent each year, what will its approximate value be seven years from now? Use Exhibit 1-A.

Learn how to calculate the future value of a house priced at $272,000 with a 3% annual increase over 7 years using the compound interest formula. This step-by-step guide covers key mathematical concepts like exponential growth and the compound interest formula. Suitable for high school students (Grades 10-12).

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