Question

Dan buys a car for £2200.

It depreciates at a rate of 0.5% per year.
How much will it be worth in 6 years?
Give your answer to the nearest penny

Answer 1

The worth of the car after 6 years is £2,134.82

Explanation:

The amount at which Dan buys the car, PV = £2200

The rate at which the car depreciates, r = -0.5%

The car's worth, 'FV', in 6 years is given as follows;

`FV = PV \cdot \left ( 1 + (r)/(100) \right )^n`

Where;

r = The depreciation rate (negative) = -0.5%

FV = The future value of the asset

PV = The present value pf the asset = £2200

n = The number of years (depreciating) = 6

By plugging in the values, we get;

`FV = 2200 * \left ( 1 + (-0.5)/(100) \right )^6 \approx 2,134.82`

The amount the car will be worth which is its future value, FV after 6 years is FV ≈ £2,134.82 (after rounding to the nearest penny (hundredth))