Depreciation of car value

Question

Suppose you bought a new car for $21,000 on May 1 2009 and its value was 18,800 on May 1, 2010. Define the constant percent rate model for the value, V(t), of your automobile after t years and specify the depreciation rate. Then calculate what its value will depreciate to by May 1, 2014

Answer 1

If one assume that the value of the car depreciates in a linear fashion, then:

 

21,000 - 18,800 = a decline of an approximated $2,200/year

 

So, the value 4 more years into the future is:

 

V(5) = 21,000 - 5 * 2,200 = $21,000 - $11,000 = $10,000

 

So, the estimated depreciated value of the car 5 years after purchase is:  $10,000