Joseph is considering purchasing a condo. He has the option of buying one in Midtown with a
present value of $150,000 or one in downtown with a future value of $200,000. If the current
market interest rate is 5 percent and he wants to buy the home with the highest future value in 5
years, he should buy the condo in downtown.

Question

Quizplus · Accepted Answer

Using the Future Value Formula, we can calculate the future value of the condo in Midtown: FV = PV*(1+r)^n = $150,000*(1+0.05)^5 = $191,142.50. 
Comparing this to the future value of the downtown condo, which is $200,000, we see that the downtown condo has the higher future value. Therefore, Joseph should buy the condo in downtown.

Joseph Is Considering Purchasing a Condo