#44
Top 50 Mistake
Using 1 + r instead of 1 - r for depreciation
"The Depreciation Direction"
The Mistake in Action
A car worth £15,000 depreciates by 12% per year for 2 years.
Wrong: $15000 \times (1.12)^2 = £18,816$
Why It Happens
Students use the compound interest multiplier (1 + r) instead of the depreciation multiplier (1 − r).
The Fix
Depreciation means losing value, so the multiplier is less than 1.
For 12% depreciation: multiplier = $1 - 0.12 = 0.88$
Correct calculation: $15000 \times (0.88)^2 = 15000 \times 0.7744 = £11,616$
Check: The value should go DOWN, not up!
Spot the Mistake
Can you identify where this student went wrong?
Depreciates by 12%
$15000 \times (1.12)^2$
Click on the line that contains the error.
Related Topics
Learn more about the underlying maths: