<em>Answer:</em>
<em>$
11093
</em>
<em>Explanation:</em><em>
</em>
<em>Recall that the formula for compound interest is:
</em>
<em>
</em><em>A
=
P
(
1
+
r/
n
)
n
(
t
)</em><em> </em>
<em>−−−−−−−−−−−−−−−−−−−−−− </em>
<em>
where:
</em>
<em>A
</em><em> = future value
</em>
<em>P</em><em> = principal (starting) amount
</em>
<em>r</em><em> = annual interest rate, expressed as a decimal
</em>
<em>n</em><em> = number of times the interest is compounded in a year
</em>
<em>t</em><em> = number of years compound interest occurs for
</em>
<em>
</em>
<em>1
.</em><em> Start by substituting your known values into the formula. Note that the annual interest rate is −
0.15 since the car depreciates (becomes lower in value) each year.
</em>
<em>
</em>
<em>A
=
25000
(
1
+
−
0.15
1
)
1
(
5
)</em><em> </em>
<em />
<em>2
.</em><em> Solve for A
.
</em>
<em>
</em>
<em>A
=
25000
(
0.85
)
)5
</em>
<em>
A
=
11092.63</em><em>
</em>
<em>
¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯
</em>
<em>A
≈
$
11093
a </em>
<em>−−−−−−−−−−−−−−−</em>
