# Math Help - finance question

1. ## finance question

A house is valued at 120000. If it appreciates at a rate of 3% per year what is the expected value of the house after five years(to the nearest hundred dollars)?

basic math 120000 x 0.03 = 3600
3600 x 5 =18000
so 138,000

If I use the formula A = P(1 +i)power n

A= 120000(1 + 0.03)power 5 = 139,112.8889 so 139,100.

Which one is good? Both answers sound OK...

2. Originally Posted by terminator
A house is valued at 120000. If it appreciates at a rate of 3% per year what is the expected value of the house after five years(to the nearest hundred dollars)?

basic math 120000 x 0.03 = 3600
3600 x 5 =18000
so 138,000

If I use the formula A = P(1 +i)power n

A= 120000(1 + 0.03)power 5 = 139,112.8889 so 139,100.

Which one is good? Both answers sound OK...
The second calculation is compound interest. For example, you deposit $1 in bank that pays 5% interest yearly. After year one, you have$1.05. After year two, the bank owes $1.05*(1+.05) =$1.1025. You earn interest on the previous interest earned.