Question

The value of a car is decreasing by 14% per year. If the car is worth 11,000 today, what will it be worth in two years?

Answer 1

For us to be able to determine the worth of the car in two years, we will be using the depreciation formula:

$\text{ FV = PV(1 - }\frac{r}{100})^n$

Where,

PV = Current value of the car

r = rate of interest

n = number of years

FV = Future value

Given:

PV = 11,000

r = 14%

n = 2 years

We get,

$\text{ FV = PV(1 - }\frac{r}{100})^n$$\text{= (11,000)(1 - }\frac{14}{100})^2$$\text{= (11,000)(1 - }0.14)^2$$\text{= (11,000)(}0.86)^2$$\text{= (11,000)(}0.7396)$$=\text{ 8,135.60}$

Therefore, the answer is 8,135.60