Future value
When you buy it is worth $60, 000
I will assume that at the end of a year it is the whole new value of the house that is increased by 5%.
After 1 year value=60,000*(1+0.05)^1
After 2 years value=$60,000(1+0.05)*(1+0.05)=60,000*(1.05)^2
Do you see the pattern?
After 7 years, the value of the house will be 60,000*(1.05)^7
However if the increase is not compounded
Then after 1 year value=60,000*(1+0.05)
After 2 years, value=60,000*(1+0.05+0.05)=60,000*(1+2*0.05)
After 7 years, value=60,000*(1+7*0.05)
Depending on the coumpounding or not the two values will be different
With compounding: final value=$84,426.02
Without compunding: final value is $81, 000.
I showed you the possible mathematical solutions. It is now up to you to decide which is the one that applies to your case.
×