Question

Need a good explanation, i dont get how to get the answer.

Fifteen years ago, Russell bought his house for $141,000. The house’s property value has decreased by 1.6% per year ever since then. If Russell sells his house, how much is it worth, to the nearest hundred dollars?
a.
$110,700
b.
$107,200
c.
$67,100
d.
$37,900

Answer 1

141000 * (1 - 0.016)^15 = 110699.48 = A 110700

Explanation:

1st year depreciation = 141000 - (141000 * 0.016) = 138744

2nd year depreciation = 138744 - (138744 * 0.016) = 136524.096

3rd year depreciation = 136524.096 - (136524.096 * 0.016) = 134339.710464

etc. unitl you reach the 15th year

Basically we calculate 1.6% of the current value of the house and subtract that from the current value for each year for 15 years.

The equation used in the answer is a faster way to approach your answer instead of calculating for each year.

You'd multiply your initial value by the difference in percentage (note well that since it is decreasing in value we subtract the decimal equivalent to 1.6% which is 0.016, from 1 where one represents 100% and then raise the difference gained to the power of the amount of years which would be 15.