Question

A new car sells for $25,000. The value of the car decreases by 15% each year. What is the approximate value of the car 5 years after it is purchased?

Answer 1

Each year its value is 100-15 = 85% of previous year  so after 5 years its value is    25,000 *(0.85)^5 =  11,092 dollars

Answer 2

Value of car after 5 years will be $ 11092.63

Explanation:

Given: Amount of car, P = $ 25,000

Value of car decreases = 15% each year that is R = 15%

Time, T = 5 years.

To find: Approximate value after 5 years.

We use the following formula of depreciation.

`A=P(1-(R)/(100))^n`

where, n is number of periods.

here, n = T = 5

So,

`A=25000(1-(15)/(100))^5`

`A=25000((100-15)/(100))^5`

`A=25000((85)/(100))^5`

`A=25000(0.4437053125)`

`A=25000*0.4`

A = $ 11092.63

Therefore, Value of car after 5 years will be $ 11092.63