Question

A brand new car was purchased for $28,000 in year 2000. The car value has dropped to

$20,000 in year 2003. What could be considered as the rate of depreciation?
(Round your answers to the nearest 10th.)

Answer 1

The rate of depreciation is 11.87% per year.

Explanation:

Given that a brand new car was purchased for $ 28,000 in year 2000, and the car value has dropped to $ 20,000 in year 2003, to determine what could be considered as the rate of depreciation, the following calculation must be performed:

20,000 x (1 + X / 1) ^ 3 = 28,000

20,000 x X ^ 3 = 28,000

20,000X ^ 3 = 28,000

X = 1.1187

Therefore, the rate of depreciation is 11.87% per year.