Question

The general equation for depreciation is given by y = A(1 – r)t, where y = current value, A = original cost, r = rate of depreciation, and t = time, in years. A car was purchased 6 years ago for $25,000. If the annual depreciation rate is 11%, which equation can be used to determine the approximate current value of the car?
y=25,000(0.890)^6
y=(25,000 . 0.11)^6
y=(25,000 . 0.89)^6
y= 25,000(0.11)^6

Answer 1

Use y = A(1 − r)^t. With A = 25,000, r = 0.11, t = 6:

y = 25,000(0.89)^6.

(Approximately y ≈ 25,000 × 0.49698 ≈ $12,425.)