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You buy a used car for $15,000. It depreciates at the rate of 23% per year. Find the value of the car for the following years.

A. 1 year

B. 3 years.

2 Answers

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Hi!

The compound interest formula is:

Final amount (A)= Original Amount x
(1 + (Rate)/(100))^(time)

The rate is the amount of interest.

In this question, your rate is decreasing so it is
100 - 23 = 77

When measuring depreciation, the formula for compound interest changes to:

Original Amount x
(1 - (Rate)/(100))^(time)

This would mean that the answer to one year would be figured out by the following equation:

15000 x
(1 - (23)/(100) )^1 , this would bring the result out to be $11550

(the time is one as there is only one year for part A).

As for part B, the time is changed to three years so the
^(time) factor is changed to three, making the formula the following:

15000 x
(1 - (23)/(100) )^3 which would make the answer $6848.

Hope this helped!
User Michael Kopp
by
8.0k points
2 votes
year 1 would be 11550
year three is 6848
User Charles Darke
by
7.6k points
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