Answer:
To find the new value of the watch, we need to apply the percentage changes to the original price of £1020. We can use the formula:
new value = old value * (1 + percentage change / 100)
For the first 4 years, the watch decreased in value by 3.5% per year. So, we can multiply £1020 by (1 - 3.5 / 100) four times:
£1020 * (1 - 3.5 / 100) * (1 - 3.5 / 100) * (1 - 3.5 / 100) * (1 - 3.5 / 100)
This gives us £873.76, which is the value of the watch after 4 years.
For the next 3 years, the watch increased in value by 7.5% per year. So, we can multiply £873.76 by (1 + 7.5 / 100) three times:
£873.76 * (1 + 7.5 / 100) * (1 + 7.5 / 100) * (1 + 7.5 / 100)
This gives us £1079.74, which is the new value of the watch after 7 years.
Therefore, the new value of the watch is £1079.74.