Arthur purchased a rental property today at the fair market value of $200,000. Arthur wants to estimate the value of the property in 10 years. Arthur assumes that his property will appreciates at a rate of 3.5% interest. With these assumptions, what can Arthur estimate the value of the property to be in 10 years?
Answer: Enter the following numbers into HP 10bii financial calculator:
N (number of months) = 120 (the time frame is 10 years or 120 months)
I/YR (Interest rate/year) = 3.5 (We are assuming that the property appreciates at 3.5%)
PV (present value) = -$200,000 (this is the value of the property today only. Note the number is negative because we treating it as if it is being "invested" today.)
PMT (payments) = 0 (no payments are being added to the property)
FV (future value) = ??? (this is what we are solving. We are estimating what the value of the prosperty will be in 10 years)
Once you enter all of the numbers and solve for FV, the answer is $283,668.96. Meaning that a home that is worth $200,000 today that appreciates at 3.5% for 10 years, would be worth $283.668.96 in ten years.
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