Question

Some cars depreciate at rates as high as 75% per year for the first two years; this means that after one year the car is only worth 25% of the original cost. Suppose that you purchase a car for $16,500 that has a depreciation rate of 75%, then what will be the value of your car in 2 years? Hint: use f(x) = 16500(0.25)*, where x is the time in years. Round your answer to the nearest = dollar. $1.568 7765 then

Answer 1

Given:

Depreciation rate = 75% per year.

$\begin{gathered} f(x)=a(1-0.75)^x \\ \\ f(x)=a(0.25)^x \end{gathered}$

Let's find the value of the car in 2 years.

Given:

Cost = $16,500

Depreciation rate = 75%

From the equation we have:

Present value, a = 16500

x is the number of years = 2

Thus, we have:

$\begin{gathered} f(2)=16500(0.25)^2 \\ \\ f(x)=16500(0.0625) \\ \\ f(x)=1031.25\approx1031 \end{gathered}$

Therefore, the value of the car in 2 years is $1,031

ANSWER:

$1,031