Answer:
Value after:
7 years = $9971.42
8 years = $8176.56
9 years = $6704.78
Rate of decay = 18%
Explanation:
A $40,000 car depreciates in value about 18% per year for the life of the car.
Determine the value of the car after 7,8, and 9 years. What is the rate of decay?
The formula for Depreciation is
FV = PV( 1 - r)^t
Where
FV = Future value
PV = Present value = $40,000
r = Depreciation rate = 18% = 0.18
t = time in years
a) After 7 years
$40,000 (1 - 0.18)⁷
= $9971.4188227
= $9971.42
b) After 8 years
$40,000 (1 - 0.18)⁸
= $8176.5634346
= $8176.56
c) After 9 years
$40,000 (1 - 0.18)⁹
= $6704.7820164
≈ $6704.78
= $9971.42
The Rate of decay = 18%