The value of items such as land and collector’s items usually increase in value over time. This increase in value is called appreciation. The calculations for appreciation are identical to those for compound interest.

EXAMPLE

A cricket ball signed by Sir Garfield Sobers was originally valued at $1,050. What is the value of the ball 10 years later if it appreciates at a rate of 12% per annum?

SOLUTION STEP 1: Determine the Appreciation Rate, . where is the annual rate of interest. STEP 2: Use the formula where is the value of the item after years and is the initial value of the item.

Try the exercise below to practise your newly developed skill.