A house purchased for $250,000 is expected to be worth twice it's purchase price in 18 years. What is the linear function that models the price P of the house versus the number of years t since the house was purchased? I got P=t(1388.8)+250,000 but not sure 

medlockb1234  Sep 22, 2017
edited by medlockb1234  Sep 22, 2017

It looks OK, except for the amount inside the bracket. It should read $13,888.88, so that:

P =t(13,888.88)  +  $250,000,  where t = 18 years. However, in cases such as this, exponential growth is more realistic and it would look like this:

$500,000 = $250,000 x [1 + i]^18. The task here would be to find i, which is very easy and it comes to=3.926%.

Guest Sep 22, 2017

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