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PLEASE HELP - Property Value

by Rose
(Sharjah, United Arab Emirates)











































what was the value of a property 2years ago if today its 100,000AED at 5%?

Comments for PLEASE HELP - Property Value

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Oct 22, 2011
Property Value vs Inflation
by: Staff

Question:

by Rose
(Sharjah, United Arab Emirates)


what was the value of a property 2 years ago if today its 100,000AED at 5%?



Answer:

5% compounded annually for 2 years

A = P(1 + r)^t

A = value of property after 2 years (what it is worth today)

P = initial value of property (what it was worth 2 years ago)

r = decimal form of annual inflation rate

t = time in years

P = unknown

r = 0.05 (.05 is the decimal form of 5%)

t = 2 years


solve for P [initial value of property (what it was worth 2 years ago)]

A = P * (1 + r)^t

Divide each side of the equation by (1 + r)^t

A / [(1 + r)^t] = P * (1 + r)^t / [(1 + r)^t]

A / [(1 + r)^t] = P * 1

P = A / [(1 + r)^t]


P = 100,000AED / (1 + 0.05)²

P = 100,000AED / 1.1025

P = 90702.9 AED



The final answer is:

If the inflation rate was 5% per annum over the last 2 years, the value of the property 2 years ago was 90703 AED (rounded to the nearest 1 AED)



Thanks for writing.

Staff
www.solving-math-problems.com



Oct 23, 2011
please help again
by: Anonymous

how comes 5% of 90702.9 + 90702.9 doesnt add up to the value of the property today that is 100,ooo? help

Oct 23, 2011
Property Value vs Inflation
by: Staff


Answer:

The increase in value is compounded


1st year

Beginning of the 1st Year:

Property Value = 90702.9 AED


End of the 1st year

By the end of the 1st year the property value has increased 5%

Increase = 90702.9 AED * 5%

= 90702.9 AED * .05

= 4535.145 AED

Property Value at end of 1st year

90702.9 AED + 4535.145 AED

= 95238.045 AED



2nd year

Beginning of the 2nd Year:

Property Value = 95238.045 AED


End of the 2nd year

During the 2nd year the property value increases another 5%

Increase = 95238.045 AED * 5%

= 95238.045 AED * .05

= 4761.90225 AED

Value at end of year

95238.045 AED + 4761.90225 AED

= 99999.95 AED


Rounded to the nearest AED, the property value at the end of the 2nd year is:

100,000 AED


Thanks for writing.

Staff
www.solving-math-problems.com

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