Question

A car is purchased for £8500

In its first year, the value of the car will depreciate
by 10%.
Each year after that, the value of the car will
depreciate by 5%.
What is the value of the car at the end of 3 years?

Answer 1

£ 6904.13

Explanation:

the final value is given by


`8500 (0.90)` at the final of the first year
then you need to add (0.95) twice (one from second and one from third year)

Notice if the depreciation is 5% the final value is 0.95 of the initial value at the beginning of the year

finally:

`8500 (0.90) (0.95)^2 = 6904.13` (rounded to nearest cent!)