In 2005 a house was purchased for $280,000 and in 2013 it was sold at $334,000. Assuming that the value of the house increased at a constant annual rate what will be the price of the house in the year 2018?
Correct answer: C. $367,750
- A. $354,250
- B. $361,000
- C. $367,750
- D. $374,500
Explanation
To solve this problem, first determine the annual increase in the house's value between 2005 and 2013. The house was bought for $280,000 in 2005 and sold for $334,000 in 2013, which is an increase of $54,000 over 8 years. This gives an annual increase of $54,000 / 8 = $6,750.From 2013 to 2018, there are 5 years. Thus, the increase in value over these 5 years is $6,750 x 5 = $33,750.Adding this increase to the 2013 value gives the 2018 value: $334,000 + $33,750 = $367,750. Therefore, Option C is correct.Options A, B, and D are incorrect because they do not match the calculated increase based on the constant annual rate.
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