Question

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.

Answer 1

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!

Answer 2

year 1 would be 11550
year three is 6848