Question

Jenelle is buying a condo that costs $225,000. If the value of the condo increases by 4% per year, how much will it be worth in 25 years? Round your answer to the nearest dollar.

Answer 1

Using the compound interest formula FV = PV (1 + r)^n, the future value of Jenelle's condo after 25 years with an annual increase of 4% is approximately $599,927, rounded to the nearest dollar.

Step-by-step explanation:

To calculate the future value of Jenelle's condo after 25 years, given a 4% annual increase in value, we'll use the formula for compound interest:

FV = PV (1 + r)^n

Where:

• FV is the future value of the investment/loan, including interest.
• PV is the present value of the investment/loan (initial amount before interest).
• r is the annual interest rate (decimal).
• n is the number of years the money is invested/borrowed.

Applying these to Jenelle's situation:

1. PV = $225,000 (the cost of the condo).
2. r = 4% or 0.04 (the annual increase rate).
3. n = 25 years (the time period of value increase).

Plugging these values into the formula:

FV = $225,000 (1 + 0.04)^25

Calculating the value in brackets first:

(1 + 0.04)^25 = (1.04)^25

Now finding this value and multiplying by the present value:

FV ≈ $225,000 * (1.04)^25

After doing the calculation:

FV ≈ $225,000 * 2.666343

FV ≈ $599,927.17

Thus, rounding to the nearest dollar, the condo will be worth approximately $599,927 after 25 years.