A Volkswagon Beetle convertible sedan is worth $16,615 now and is expected to be worth $8950 in 4 years.

Question

a) find a linear depreciation function for this car.
b) estimate the value of the car 5 years from now
c.) at what rate is the car depreciating?

thanks in advance people!

Answer 1

let the rate of depreciation be r
8950 = 16615(1+r)^4
.5386699 = (1+r)^4
take 4th root
.8567 = 1+r
r = -.1432

so the annual rate of depreciation is 14.32%

in 5 years
value = 16615(1-.1432)^5 = 7667

Answer 2

thank you for the help!!