Question

The value of a dirt bike decreases by 25% each year. If you purchased this dirt bike today for $500, to the nearest dollar how much would the bike be worth 5 years later?

A.) $84
B.) $119
C.) $164
D.) $222

Answer 1

The value of the bike at any year n is calculated through the equation,
                          At = (A1) x (1 - r)^n
Substituting the known values,
                          At = ($500) x (1 - 0.25)^5 = $118.65
Thus, the bike would cost only $118.65 after 5 years and the answer is letter B.