Question

A car bought for RS 1,000,000 depreciates each year by 5%.what is the insurance premium paid in the first year , second year , and the third year of purchase?


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Answer 1

Answer:

1st year = RS 50,000

2nd year = RS 47,500

3rd year = RS 45,125

Step-by-step explanation:

Given the cost of a car to be RS 1,000,000, if the car depreciates yearly by 5%, then the insurance premium paid which is the operating expenses eacg year will be calculated as thus;

In the first year;

insurance premium paid = 5% of RS 1,000,000

= 5/100 * 1,000,000

= RS50,000

cost of the car after the first year of usage = 1,000,000-50,000

= RS 950,000

In the second year;

Insurance premium paid in the second year = 5% of RS 950,000

= 5/100 * 950,000

= 5*9,500

= RS 47,500

cost of the car at the end of second year = 950,000-47,500 = RS 902,500

In the third year;

Insurance premium paid in the third year = 5% of RS 902,500

= 5/100 * 902,500

= 5*9,025

= RS 45,125