A property valued at $195,000 appreciates at 3% per year for 2 years. What is the value at the end of year 2?
Correct Answer
B) $206,876
Compound appreciation is calculated year by year. Year 1: $195,000 × 1.03 = $200,850. Year 2: $200,850 × 1.03 = $206,875.50, which rounds to $206,876. Simple (non-compounded) appreciation would be $195,000 × 1.06 = $206,700, but compound growth yields the higher figure.
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