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You just so happen to have $300,000 in your savings account, which pays a guaranteed %5.0 annual interest. You invest the entire amount into buying house, and sell the house three years later for $351,700. Is this a good investment?

Respuesta :

MrCreighton

In this instance you will need to calculate the future value of the investment. The formula for this is FV = I * [1 + (R * T)]

FV - future value

I - initial investment (300,000)

R - Interest Rate (5%)

T - number of years you will hold the investment (3 years)

Once you calculate this formula, you will need to compare it to the price of the home if they sold it (351,700). If the future value calculation is LESS than the sales price, then the house was a GOOD investment.

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