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During a boom in the real estate market, the value of properties increased on average by 15 percent each year.
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What was the percentage increase every five years?
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If we consider the original value to be 100 percent, then at the end of the first year following a 15 percent increase, the new value will be 115 percent.
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This means that our multiplier will be 1.15 per year.
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After two years, the multiplier would be 1.15 squared.
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In the same way, after three years, it would be 1.15 cubed.
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After four years, 1.15 to the power of four.
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And after five years, the multiplier would be 1.15 to the power of five.
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As we’re asked for the percentage increase every five years.
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This is the value that we are interested in.
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The five-year increase will be equal to 1.15 to the power of five.
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1.15 is equal to 2.01.
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Converting this to a percentage gives us 201 percent.
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Therefore, if the value of property is increased by 15 percent each year, there is approximately a 200 percent increase every five years.