Question

26. A student was asked to find the value of a $2500 item after 4 years. The
item was depreciating at a rate of 20% per year. What is wrong with the student's work?
2500(0.2)
$4

Answer 1

The student's work is wrong because she did not subtract the rate of depreciaton from 100%.

What is the equation that represents the value of the money?

Depreciation is when the value of an asset declines with the passage of time.

FV = P (1 - r)^n

• FV = Future value
• P = Present value
• R = interest rate
• N = number of years

2500 x (1 - 0.20)^4 = 1024

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