Question

The value of a new truck decreases by 5%upon taking ownership. After that, the value of the truck decreases by 6.5% each year. If the truck is initially valued at $25,000, how much will its value be after 7 years of ownership?

Answer 1

First, the truck loses 5% of its value. We can write this as:

`V_t = 25000- (0.05(25000)) = 23750`

Now, the car costs $23750. After we use it for 7 years, then, we can write the following:

`V_c = (1-0.065)(23750)^7 = 14836.96`

So, it currently costs $14836.96.

Answer 2

Initial Value = $25000
Upon taking over:
Value = 25 000 - (5% x 25 000)
value = 25 000 - (0.05 x 25 000)
value = 25 000 - 1250 = $23 750

value after next 7 years compounded =
23750 (1 - 0.065)^7 = $14836.96