Math word problem

Question

A Nissan Altima was bought in January 2010 for $27 000. An insurance company decides to
calculate its depreciation per annum as 5%. Find:
(a) Its book value 3 years later
(b) The amount by which it depreciates for the same time period.

Answer 1

Rae,

 

Depreciation by 5% means just what it says - that the car will be worth less - 95% - which is a 100% with 5% taken out of it

End of year 1: 27,000*0.95 = $25,650

End of year 2: 25,650*0.95 = $24,367

End of year 3: 24,367*0.95 = $23,149 is the book value at three years latter

 

b) Just subtract the current book value with the price at 2010 =  27,000 - 23,149