Question

A new car sells for $25,000. The value of the car decreases by 15% each year. What is the approximate value of the car 5 years after it is purchased?
25,000 (1 minus 0.15) Superscript 5, or approximately $11,093
25,000 minus 1500 (5), or approximately $17,500
25,000 (0.15) Superscript 5, or approximately $18,984
25,000 minus left-bracket (100 minus 15) (5) Right-bracket, or approximately $24,575

Answer 1

Correct answer: 25,000(1 − 0.15)^5 ≈ $11,093.

Explanation: Each year the car retains 85% of its value, so after 5 years value = 25,000 × 0.85^5 ≈ 25,000 × 0.443705 ≈ $11,093.