Question

You purchase an antique car today for $41,774

You expect the price of the car to rise by 4% per year for the next 7 years.

What do you expect the price of the car to be in year 7?

Answer 1

Here we will use the following formula:

FV = PV * (1 + r%)ⁿ

where, FV = Future value, PV = Present value = $41774, r = rate of interest = 4%, n= time period = 7

now, putting theses values in the above equation, we get,

FV = $41774 * (1 + 4%)⁷

FV = $41774 * (1 + 0.04)⁷

FV = $41774 * (1.04)⁷

FV = $41774 * 1.31593177924

FV = $54971.73

So, the price of the car in year 7 will be $54971.73.