In compound interest the amount in interest is added to the original at the end of each year. So the next year the interest is worked out on a larger amount of money.

Appreciation is the increase in value of an item. A common example of this is house prices. Each year, the value of a house increases, so we say that its value appreciates.

The rate of appreciation is often given as a percentage.

A flat is bought for .

In each of the three years that follows, its value appreciates by .

How much is the flat worth after three years?

**Year 1 appreciation:**

Flat Value =

**Year 2 appreciation:**

Flat Value =

**Year 3 appreciation:**

Flat Value =

So after three years, the flat is worth .

Depreciation is the decrease in value of an item. A common example of this is car prices. Each year, the value of a car decreases, so we say that its value depreciates.

The rate of depreciation is often given as a percentage.

A new car costs .

The car loses of its value during the first year and of its value during the second year.

How much is the car worth after two years?

**Year 1 depreciation:**

Car Value =

**Year 2 depreciation:**

Car Value =

So after 2 years, the car is worth .

It is also possible to calculate how much an item has appreciated or depreciated simply by finding the difference in value as a percentage of the original value.

A computer worth has depreciated in value to in the past three years.

What is the percentage depreciation in the value of the computer?

Depreciation =

Percentage depreciation =