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Determining the value of property

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A friend of Smith's suggests that real estate is a good investment these days. Smith thinks that this would have a lot of advantages for when he retires. Being a landlord would give him free time and good cash flow with minimum effort. Smith thinks about buying an apartment. A local newspaper states that value of property in 'Area A' has been increasing steadily by 5% since last 20 years whereas value of property in 'Area B' has been increasing steadily by 3% during the same time period. Smith wonders:

If he buys an apartment in 'Area A' that would have a future value of $350,000 after 10 years, how much would the apartment cost him today, if the value of property continues to increase by the same percentage as the newspaper says?

Reference no: EM132611719

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