You buy a used camper in 2000 for $25,000.

Question

You buy a used camper in 2000 for $25,000. Each year the value of the camper depreciates by 1.8%. To the nearest dollar, what would the value of the camper be in 5 years?

 

a. $27,332

b. $22,830

c. $1,826.36

d. $22,848

Answer 1

There is a depreciation formula for finding the future value.

V=C(1-r)^t

V=future value

C=original value or cost=$25000

r=depreciation rate=1.8%=.018

t=time in years

 

V=25000(1-.018)⁵

V=$22829.56

 

rounded to the nearest dollar the answer is b) $22,830

 

Answer 2

First look at 100 losing 10% a year for 5 years.

100 -10  = 90

90 - 9 = 81

81 - 8.1 = 72.9

72.9 - 7.29 = 65.61

65.61 - 6.561 = 59.139

This is a compound interest problem with negative interest.

25000- 25000*.018 = 24550

24550 - 24550*.018 = 24108.1

24108.1 - 24108.1*.018 = 23674.1542

23674.1542 - 23674.1542*.018 = 23248.0194244

23248.0194244 - 23248.0194244*.018 = 22829.555074761 or 22830