Alex purchased a new car for $28,000. The car depreciates 7.25% each year. What will be the value of the car 5 years after its purchased?

Answer 1

To find the value of the car 5 years after its purchased, we need to calculate the depreciation each year over 5 years.

First, we find the depreciation amount for the first year:
Depreciation = $28,000 * 7.25% = $2,030

After the first year, the value of the car will be:
$28,000 - $2,030 = $25,970

For the second year:
Depreciation = $25,970 * 7.25% = $1,881.98

After the second year, the value of the car will be:
$25,970 - $1,881.98 = $24,088.02

Continue this process for 5 years:

- After the third year: $22,318.62
- After the fourth year: $20,734.88
- After the fifth year: $19,297.71

Therefore, the value of the car 5 years after its purchased will be approximately $19,297.71.

Answer 2

seems like a lot of work. Each year, the value decreases by 7.25%, leaving 92.75% remaining.
So after 5 years, we have 28000 * 0.9275^5 = 19,218.86
not sure why your result differs

Answer 3

You are correct. I made an error in my calculations. Thank you for pointing it out.

Using the correct formula:
Value after 5 years = $28,000 * (1 - 0.0725)^5
Value after 5 years = $28,000 * 0.9275^5
Value after 5 years ≈ $19,218.86

So, the value of the car 5 years after its purchased will be approximately $19,218.86. Thank you for catching that mistake.