A property is purchased for $200,000 and appreciates at 3% per year compounded annually. What is the value after 2 years?
Correct Answer
B) $212,180
With compound annual appreciation of 3%, Year 1: $200,000 × 1.03 = $206,000. Year 2: $206,000 × 1.03 = $212,180. Option C ($212,000) is incorrect because it does not apply compounding — it simply adds 3% of the original value twice (simple appreciation), which would be $200,000 + $6,000 + $6,000 = $212,000.
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