Question

You purchased an automobile a year ago for $10,000. Its current market price is $6,000, and the expected market value one year from now is $4,000. If the interest rate is 10 percent, how much will it cost you to keep the car for an additional year (over and above operation and maintenance costs)

Answer 1

Answer: $2600

Step-by-step explanation:

From the information given, the cost price of the automobile is $10000 but the current market price is $6000. If the automobile is old now for $6000 and the money is kept in a bank for.one year at an interest rate of 10%, then the interest gotten on it will be:

= $6000 × 10% × 1

= $600

In a situation whereby the automobile is sold the following year, then the price will be $4,000 and I will get $4,000. Therefore, the cost for keeping the car for an additional year will then be:

= (Current price - Future price) + Interest amount

= ($6,000 - $4,000) + $600

= $2,600.