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Understanding Compound Measures: Interest, Salary Increases, and Depreciation

This guide explores compound measures through practical examples, including interest calculations, salary growth, and asset depreciation. Learn how to determine the future value of savings with a 12% interest rate over different years, calculate salary increases with a consistent 6% yearly raise, and evaluate property values decreasing by 10% annually. Additionally, understand how a car's value declines by 17% each year. These scenarios provide clear insights into financial growth and loss over time.

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Understanding Compound Measures: Interest, Salary Increases, and Depreciation

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  1. Compound Measures • Example • A bank pays interest of 12%. If Mr Smith puts £4000 into the bank, how much will he have after • One year • Three years • Ten years

  2. Example In 2005 Mrs Watson’s salary was £30 000 per year. Her pay is increased by 6% each year, what will her salary be in 2008?

  3. Example • The price of a house was £250 000. At the end of each year the price has decreased by 10%. What is its value at the end of • 1 year • Three years • Five years?

  4. Example • Ben buys a car at £7000, each year the car will depreciate in value by 17%. What will be the value of the car in • 2 years • 8 years?

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