Which expression represents its expected value in 5 years?

Question

A delivery van valued at $ 25,00 today is depreciating in value exponentially at a rate of 12 % each year.  Which expression represents its expected value in 5 years? 

A. 25,000 - 25,000 (0.12)^5

B. 25,000+ 25,000 (0.12)^5

C. 25,000 (0.88)^5

D. 25,000 (1.12)^5

Answer 1

Let V(t) be the value of the van in t years:

 

V(t) = ($25,000)(1 - 0.12)^t = ($25,000)(0.88)^t

 

In t = 5 years:

 

V(t) = ($25,000)(0.88)⁵