Thread: real estate purchased

If a piece of real estate purchased for $50.000 in 1998 appreciates at the rate of 5% per year, then its value t years after the purchase will be f(t)=50,000(1.05^t). According to this modle, by how much will the value of this piece of property increase between the years 2007 and 2008?
my answer
50,000x1.05=52500, goes up 2500 every year, so my answer is 2500, in one year $2500. or in 10 yrs it has apprecites to 75,000. I'm not sure if I have set this one up right. Thanks so much for checking my answer.

Originally Posted by kwtolley

If a piece of real estate purchased for $50.000 in 1998 appreciates at the rate of 5% per year, then its value t years after the purchase will be f(t)=50,000(1.05^t). According to this modle, by how much will the value of this piece of property increase between the years 2007 and 2008?
my answer
50,000x1.05=52500, goes up 2500 every year, so my answer is 2500, in one year $2500. or in 10 yrs it has apprecites to 75,000. I'm not sure if I have set this one up right. Thanks so much for checking my answer.

2007 is 9 years after 1998, so the value in 2007 is:

50000 (1.05^9) ~= 77566.41

in 2008 its velue is:

50000 (1.05)^10 ~= 81444.73

so the increase in value from 2007 to 2008 is 81444.73-77566.41=3878.32

RonL