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Thread: Probability Question

  1. #1 Probability Question 
    New Member
    Join Date
    Apr 2006

    Thank you to the contributors on this forum.
    My question is not a homework question but rather concerns an idea I have been thinking of for some time.

    Suppose there are two parties to an agreement whereby one party agrees to pay the other party a sum of money, should an asset not appreciate in a value by a percetage (say 5%) over a period of time (say 2 years).

    How do you work out the probability of the asset increasing value by 5% ?

    Many thanks in advance


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  3. #2  
    I think that's done by knowing the history of value for that object, eg. if the price of a house has increased on average at 12% per yaer for the last x years, and you know the population age distribution you can predict the possibility of maturity in the population requiring more housing in the future, with land finite but the population rising, demand rises, supply (of land) does not - result higher prices in future.

    On the other hand consider technology, say a TV, in 1965 a Color TV (in the UK) cost around £500 when the monthly salary was around £70-00 per month. Today salaries around £2000 per month and a TV can cost as little as £70-00 so in this case the asset value will almost certainly fall.

    Antiques are a different matter again.

    So to "guesstimate" value in the future you need at least the item's history IMHO.

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