Question

You buy a car for $8000 that depreciates at a rate of 11% a year. How much is the car worth after 5 years? Round to the nearest cent.

Answer 1

Step 1

Write all parameters out.

Initial cost P = $8000

% Depreciation r = 11% = 11/100 = 0.11

Time t = 5 years

Cost after 5 years = A

Step 2

Apply exponential decrease formula to find the worth of the car after 5 years

`\begin{gathered} A=P(1-r)^t \\ A=8000(1-0.11)^5 \\ A=8000(0.89)^5 \\ A\text{ = 8000 }*\text{ 0.5584} \\ A\text{ = 4467.25} \\ A\text{ = 4467} \end{gathered}`

Therefore,

The worth of the car after 5 years = $4467