Mr. and Mrs. Sawyer bought a condonminium for $75,000. Assuming that it value will appreciate 6% a year, how much will the condo be worth iin five years when the Sawyers are ready to move?
Steps please.
To calculate the future value of the condo in five years, we will use the formula for compound interest:
Future Value = Present Value * (1 + Rate)^Time
Here's how to calculate it step by step:
Step 1: Determine the present value
The present value of the condo is given as $75,000.
Step 2: Identify the rate of appreciation
The rate of appreciation is given as 6% per year. To use the formula, we need to convert the percentage to a decimal. Therefore, the rate is 0.06.
Step 3: Determine the time period
The time period is five years, as mentioned in the question.
Step 4: Calculate the future value
Using the formula, we can substitute the values:
Future Value = $75,000 * (1 + 0.06)^5
Step 5: Simplify the equation
Calculate the value within the parentheses:
(1 + 0.06)^5 = (1.06)^5
(1.06)^5 = 1.33823...
Now, multiply the present value by the result:
Future Value = $75,000 * 1.33823...
Future Value ≈ $100,367.25 (rounded to the nearest dollar)
Therefore, after five years, the condo will be worth approximately $100,367 when the Sawyers are ready to move.