Compound Interest, Appreciation & Depreciation Notes

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Compound Interest, Appreciation & Depreciation Notes

When the value of something has gone up (appreciation) or down (depreciation) by the same amount over a number of years, the increase/decrease value will vary year to year.

We can overcome this problem by adding/subtracting the percentage to/from 100, converting this to a decimal, then multiplying the original value by this no. to the power of years.

Example

I invest £3000 for 5 years of 3.2% APR

Working:

100 = 3.2 = 103.2%

= 1.032

3000 x 1.032 (to the 5th power) = £3511.7188

= £3511.72

Formula: original x decimal (to the power of number of years)