Question

In order to buy a new car, you finance $20,000 with no down payment for a term of five years at an APR (Annual Percentage Rate) of 6%.
After you have the car for one year, you are in an accident. No one is injured, but the car is totaled.
The insurance company says that before the accident, the value of the car had decreased by 25% over the time you owned it, and the company pays you that depreciated amount after subtracting your $500 deductible.
How much money does the insurance company pay you? (Don't forget to subtract the deductible.)

Answer 1

V = 20,000 - 0.25*20,000 = 15,000 = Value after 1 yr.

15,000 - 500 = $14,500. = Amt. paid by Ins.

Answer 2

reply Henry there is no interest rate in your calculation