Question

The value of a car will “depreciate” over time. For example, a car that was worth $24 000 when it was new, is being sold for $13 500 three years later. Determine the annual depreciation rate on this car. Express your final answer as a percent, rounded to one decimal place.

Answer 1

The car will depreciate at a rate of 21.14% per year.

Explanation:

Given that the value of a car will “depreciate” over time, and, for example, a car that was worth $ 24,000 when it was new, is being sold for $ 13,500 three years later, to determine the annual depreciation rate on this car the following calculation must be performed:

13,500 x (1 + X) ^ 1x3 = 24,000

13,500 x (1 + 0.2114) ^ 3 = 24,000

X = 21.14%

Therefore, the car will depreciate at a rate of 21.14% per year.