Answer:
The annual depreciation rate is 72.86%.
Step-by-step explanation:
The information provided are:
- At the band’s peak of popularity, a signed Black Diamond poster sold for $500.
- Three years later, the band was almost forgotten, and the poster was worth only $10.
From the above data we know that the band's popularity depreciated.
The initial cost of a signed Black Diamond poster was, <em>a</em> = $500.
After three years the cost of a signed Black Diamond poster was, <em>y</em> = $10.
It can be seen that the value of a signed Black Diamond poster is decreasing exponentially over the years.
The formula for exponential decay or depreciation is:
Here,
<em>y</em> = final value
<em>a</em> = initial value
<em>r</em> = rate of depreciation
<em>x</em> = time
Compute the annual depreciation rate as follows:
Thus, the annual depreciation rate is 72.86%.