Question

Suppose your friend buys a new car for $22,000.
The value of the car decreases by 40% each year.
How much value does the car lose (in dollars) after one year?

Answer 1

Value the car loose after one year is $13,200.

What is Interest?

Interest is the price you pay to borrow money or the cost you charge to lend money. Interest is most often reflected as an annual percentage of the amount of a loan

Using the formula

A = P(1 - r)^ t

Where

A=  value of the car after t years.

t= number of years.

P = initial value of the car.

r = rate of interest.

given,

P = $22000

r = 40% = 0.4

t = 1 years

So,

A = 22000*$(1 - 0.4)^{1}$

A = 22000*$(0.6)^{1}$

A = $13,200

Hence, value of car will be $13,200.

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