Question

Assume that a piece of land is currently valued at $50,000. If this piece of land is expected to appreciate at an annual rate of 5% per year for the next twenty years, how much will the land be worth twenty years from now?

Answer 1

Answer:

The correct answer is $132,664.89.

Explanation:

According to the scenario, the given data are as follows:

Present value (PV) = $50,000

Rate of interest (r) = 5%

Time period (n) = 20 Years

So, we can calculate future value by using following formula:

Future value = PV × (1 + r)^(n)

= $50000 × ( 1 + 5% )^20

= $50000 × (1 + 0.05)^20

= $132,664.89

Hence, After 20 years land will be worth $132,664.89.

Answer 2

If the piece of land keeps increasing in value for twenty years, the land will be worth $132,664.89.

What will the land be worth?

The value of the land in 20 years is:

= Value of land x ( 1 + rate of increase) ^ number of years

Solving gives:

= 50,000 x ( 1 + 5%)²⁰

= $132,664.89

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