Question

A jet ski depreciates at 11% of its original value each year. If the jet ski was $8000 at its time of purchase, what is the value of the jet ski after 5 years?
$13,480.47

$7,120.00

$6,958.86

$4,467.25

Answer 1

The correct answer would be D) $4,467.25. This should be calculated compoundedly, as depreciation does not work in a linear fashion. Year 1 depreciation would be 11% of $8000 = $7120. Year 2 depreciation would be 11% of $7120 = $6336.80. Year 3 would be so on until you reach Year 5 and you get the final value as $4467.25.