Forum Discussion
Future Value Formula with Multiple Rates of Increase
Hello,
I'm a real estate appraiser, and need to create a formula that brings my comparable sales up to the current date of value. For instance, a comp may have sold on 6/1/2022, but my date of value is 2/5/2025. During this time period, real estate values increased by annual rates of: 6% in 2022, 8% in 2023, 5% in 2024, and 2% so far in 2025. I need a formula which calculates the compounded appreciation as a percentage during the time period.
Any input is much appreciated!
2 Replies
Take this:
Future Value (FV)=Present Value (PV)×(1+r1)×(1+r2)×…×(1+rn)
FV2025=PV×(1+0.06)×(1+0.08)×(1+0.05)×(1+0.02)
FV2025=PV×1.06×1.08×1.05×1.02
For express the overall compounded appreciation as a percentage:
Compounded Appreciation=(FV2025/PV)−1
Thank you for your reply. The above formula simply calculates the future value by applying the rate of appreciation to the entire year. However, in this example the comparable sale occurred on 6/1/2022, so the formula would need to calculate the number of days left in the year and apply the annual percentage rate to those remaining days. Further, the date of value is 2/5/2025, so the formula would also need to calculate the number of days that have lapsed so far in 2025, and apply the annual percentage rate to those days.
