Question

Find the balance in the account. $3000 principal earning 3% compounded annually, after 4 years.

2. A tractor costs $14,340 and depreciates in value by 15% per year. How much will the tractor be worth after 3 years?

Answer 1

Part 1)
`\$3,376.53`

Part 2)
`\$8,806.55`

Explanation:

Part 1) we know that

The compound interest formula is equal to

`A=P(1+(r)/(n))^(nt)`

where

A is the Final Investment Value

P is the Principal amount of money to be invested

r is the rate of interest in decimal

t is Number of Time Periods

n is the number of times interest is compounded per year

in this problem we have

`t=4\ years\\ P=\$3,000\\ r=0.03\\n=1`

substitute in the formula above

`A=\$3,000(1+(0.03)/(1))^(1*4)=\$3,376.53`

Part 2) we know that

The formula to calculate how much will the tractor be worth after t years is equal to

`P=C(1-r)^(t)`

where

C is the original cost

P is the depreciated value

r is the rate of depreciation in decimal

t is the number of years

in this problem we have

`t=3\ years\\ C=\$14,340\\ r=0.15`

substitute the values

`P=\$14,340(1-0.15)^(3)=\$8,806.55`