UNIT OVERVIEW

This topic covers two important financial concepts: growth (how money increases over time) and decay (how assets lose value over time).

You already know about compound growth from Grade 10. Now you will learn about depreciation — how cars, computers, and machinery decrease in value. You will also learn about nominal and effective interest rates, which help you compare different investment options.

What You Will Learn

• Calculate straight-line depreciation using $A = P(1 - in)$
• Calculate reducing-balance depreciation using $A = P(1 - i)^n$
• Understand when each depreciation method is used
• Convert between nominal and effective interest rates
• Understand how compounding periods affect investments
• Solve multi-step financial problems

Why This Matters

• Buying a car: Knowing depreciation helps you understand what your car will be worth when you sell it.
• Business decisions: Companies use depreciation for tax calculations and planning equipment replacement.
• Choosing a bank: Understanding nominal vs. effective rates shows which account truly gives better returns.
• Home loans: Different compounding periods affect how much you pay over the life of a bond.

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