If an apartment building has increased in price at least 23% three times in 10 years, is guarantee of an 8% profit justified?

If an apartment building has increased in price at least 23% three times in 10 years, is guarantee of an 8% profit justified?

• A. Yes, due to a solid historical trend
• B. No, past performance does not ensure future profit
• C. Yes, since it's above the local average
• D. No, guarantees are always unethical

Answer: (B)

The reasoning behind stating that a guarantee of an 8% profit is not justified hinges on the relationship between past performance and future predictions in real estate. An increase in price over several years does suggest a positive trend; however, it does not ensure that this trend will continue. Real estate markets can fluctuate due to various factors, including economic conditions, interest rates, and changes in local demand. While historical trends may provide some insight, they do not constitute a reliable predictor of future performance. Each investment carries inherent risks, and just because an asset has appreciated in the past does not mean it will do so consistently in the future. Real estate can be particularly volatile, and market conditions can change rapidly, which makes guarantees about future profits misleading. Therefore, the underlying principle here is that while historical data can provide context for potential performance, it should not be used as a basis for guarantees regarding future profits.

The reasoning behind stating that a guarantee of an 8% profit is not justified hinges on the relationship between past performance and future predictions in real estate. An increase in price over several years does suggest a positive trend; however, it does not ensure that this trend will continue. Real estate markets can fluctuate due to various factors, including economic conditions, interest rates, and changes in local demand.

While historical trends may provide some insight, they do not constitute a reliable predictor of future performance. Each investment carries inherent risks, and just because an asset has appreciated in the past does not mean it will do so consistently in the future. Real estate can be particularly volatile, and market conditions can change rapidly, which makes guarantees about future profits misleading. Therefore, the underlying principle here is that while historical data can provide context for potential performance, it should not be used as a basis for guarantees regarding future profits.