Question

Is the answer $74.25?

The original value of a car is $22,000, and it depreciates (loses value) by 15% each year. What is the value of the car after three years?

$15,895

$13,510.75

$56,595

$74.25

22000, 3300, 495, 74.25

Does it mean the third term or the forth? That confused me. 495 isn't an answer choice so I kept going...

Answer 1

The value decreases by 15% each year. This is same as saying the value will be 0.85 times the original value after each year.

After first year the value will be: 22,000 * .85 = 18,700
After second year the value will be: 18,700 * .85 = 15,895
After third year the value will be: 15,895 * .85 = $13,510.75

Answer 2

wait were did you get .85 from?

Answer 3

The value decreases by 15% each year.
So if I start with, say, $100, the value will drop by 100 * 15 / 100 = $15 after one year.
So what was $100 now will be 100 - 15 = $85 after one year which is 0.85 * $100.

So 15% reduction in value each year is same as multiplying by 0.85 each year

Answer 4

If you want to do it the longer route you can.
Start with $22,000
A 15% reduction is: 22000 * 15 / 100 = $3,300
So the value after one year will be $22,000 - $3,300 = $18,700

We could have quickly arrive at the same result by multiplying 22000 by 0.85 = 18,700

Answer 5

And you have to continue the above for two more years to get the final answer of $13,510.75

Answer 6

thank you :)

Answer 7

You are welcome.