Say you buy an house as an investment for 250000$ (assume that you did not need a mortgage). You estimate that the house will increase in value continuously by 31250$ per year. At any time in the future you can sell the house and invest the money in a fund with a yearly interest rate of 8.5% compounded bi-monthly.

If you want to maximize your return, after how many years should you sell the house? Report your answer to 1 decimal place.

3.3 years  

Step-by-step explanation:

Let the price of the house  when it is being sold be =  x

The Annual return received from the fund after a year that house is being sold is : A -  P

where ;

P = current market price

A = price after one year

A is given by the formula:

where ; P = x

r = 8.5% = 0.085

n = 12

t = 1

A = 1.08839 x

The annual return is A - P = 1.08839 x - x

= 0.08839x

However, the house should be sold when this return is equivalent to the annual increase in value of the house

∴ 0.08839x = 31250

Thus , the current price (x) = $353546.78

Profit till that time = Current price - Initial Price

= (353546.78- 250000)$

= $103546.78

The time taken for this much profit to accumulate =

=

= 3.3135

≅ 3.3 years                 ( to one decimal place)

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christopher is 272,195 year old

step-by-step explanation: