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Ontario MTH1W · Financial Literacy · F1.2

Appreciation and depreciation

Analyse how an asset’s value increases or decreases by a percentage over time.

The core idea

Appreciation increases value; depreciation decreases it. For one percentage change, multiply by 1 plus or minus the decimal rate. Repeated annual changes compound from the new value each year.

Learning example

Calculate one year of depreciation

A car worth $24,000 depreciates by 12% in one year. What is its new value?

  1. 1

    The retained-value factor is 1 − 0.12 = 0.88.

  2. 2

    Multiply the original value: 24,000 × 0.88.

  3. 3

    The new value is $21,120.

Answer$21,120

A common mistake

Subtracting 12 dollars. A 12% decrease means subtracting 12 per 100, not a flat $12.

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