Based on a six-month increase of 10% on a property originally priced at $800,000, what is the implied annual appreciation rate?

Based on a six-month increase of 10% on a property originally priced at $800,000, what is the implied annual appreciation rate?

• A. 10%
• B. 15%
• C. 25%
• D. 20%

Answer: (D)

When you have a six-month gain of 10%, you annualize that change by applying it to the full year in a straightforward, non-compounding way. A 10% rise on an $800,000 property adds $80,000 in six months. If the same amount of gain occurs in the next six months, the total yearly increase would be $160,000. That’s $160,000 divided by the original $800,000, which equals 0.20, or 20% per year. This is the simplest way to express the implied annual rate from a six-month change. If you instead used compounding, the annual rate would be slightly higher: (1.10)^2 − 1 = 21%. But the common implied annual rate given a six-month 10% change is 20%.

When you have a six-month gain of 10%, you annualize that change by applying it to the full year in a straightforward, non-compounding way. A 10% rise on an $800,000 property adds $80,000 in six months. If the same amount of gain occurs in the next six months, the total yearly increase would be $160,000. That’s $160,000 divided by the original $800,000, which equals 0.20, or 20% per year.

This is the simplest way to express the implied annual rate from a six-month change. If you instead used compounding, the annual rate would be slightly higher: (1.10)^2 − 1 = 21%. But the common implied annual rate given a six-month 10% change is 20%.