Question

A new car that sells for $18.000 depreciates at a rate of 25% per year. Find the value of the car after 4 years ?

Answer 1

After 4 years, the value of the car would be of $5695.31.

Explanation:

The formula for compound interest works perfectly in this case:

`a = p {(1 + (r)/(n) )}^(nt)`

As in this case the repetitions per annum are just 1 (yearly), we can ignore the n.

Replacing variables with our values, a yields the depreciated value:

`a = 18000 {(1 - 0.25)}^(4) \\ a = 18000 {(0.75)}^(4) \\ a = 18000(0.31640625) \\ a = 5,695.3125 = 5695.31`