Appreciation, depreciation and compound interest can all be calculated using the multiplier method.
Part ofMathsNumerical skills
Appreciation refers to when the value of something increases over time.
The value of a house usually increases with time. Therefore its value is said to appreciate.
A flat bought for £74 000 in 2008 appreciated in value each year by 1.5%.
Calculate the value of the house after four years.
We can use the multiplier method.
The multiplier is 1 + (1.5% of 1). This is 1+0.015 which is 1.015.
We multiply 74000 by this 4 times.
\({(1.015)^4} \times \pounds74\,000\)
\(= \pounds78\,540.90\)
The value of the flat after four years is £78 540.90
(Another way of doing this is to calculate 1.5% of the value and add it on. We would repeat this until we had done it 4 times).
