Gary brought a house for £235000. In the first year the value of the house depreciated by 5%. In each of the years 2,3, and 4 the value of the house increased by 7%. Work out the value of the house at the end of the fourth year?
This question is testing your understanding of multipliers. In the first year Since the house value depreciated by 5% the multiplier we use is: 100% - 5% = 95% = 0.95 So we multiply £235,000 by 0.95 which gives us: £223,250. Let’s move on to the second year: Since the house value increases now, our multiplier is: 100% + 7% = 107% = 1.07 so we multiply the current house value which is £223,250 by 1.07 which gives: £238,877.50 in the third year as the house value increases by the same percentage we again use a multiplier of 1.07. £238,877.50 x 1.07 = £255,598.925 (note I dId not round mt value here as I have not finished the question yet) in the fourth year we do the same thing again as the house value increases by 7%. £255,598.925x 1.07 = £273,490.85 Thus by the end of the fourth year the house value is: £273,490.85 _____________________________________________ Alternatively if you are more advanced and comfortable with multipliers you can instantly do the following sum: £235,000 x 0.95 x (1.07)^3 = £273,490.85 Where the ^3 means cubed. This is because for three years the house value increased by 7%. Hope this makes sense, if not give me a message.
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