Question

A new suv depreciates in value each year by a factor of 15

Answer 1

The expected value of a car worth $25,000 after 5 years will equals to $11,093.

What is the formula for compound interest?

$A = P (1 + r/n)^ni$ where p = $25,000, r= 0.15, i = 1, i = 5

A = 25000* (1 + -0.15/1)^5*1

A = 25000*(0.85)^5

A = 25000*0.4437053125

A = 11092.6328125

A = $11,093

Hence, the expected value of a car worth $25,000 after 5 years will equals to $11,093.

Therefore, the Option B is correct.

Full question "What is the expected value of a $25,000 car after 5 years (rounded to nearest whole dollar)? A) $20750 B) $11093 C) $9429 D) $6250?

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