Question

The purchase price for a condo is $87,000. competing investments offer 5% interest for 8 years. what should the selling price of the condo be to be comparable to other investments?

O $87,000
O $134,300
O $91,400
O $128,500
O $103,200

Answer 1

The selling price of the condo should be approximately $128,500 after 8 years to be comparable to other investments offering a 5% annual interest rate compounded annually. Therefore correct option is D

Step-by-step explanation:

The question asks for the calculation of the future selling price of a condo that would make it an equivalent investment to one offering a 5% annual interest rate over 8 years.

To calculate this, we use the formula for compound interest, which is P(1 + r/n)^(nt), where P is the principal amount ($87,000), r is the annual interest rate (0.05), n is the number of times that interest is compounded per year (1 for annual compounding), and t is the time in years (8).

By substituting the values, we get $87,000(1 + 0.05/1)^(1*8) = $87,000(1.05)^8

= $87,000(1.477455)

≈ $128,500.

Thus, to be comparable to the other investments, the selling price of the condo after 8 years should be approximately $128,500.