An investment decreases by 2% per year for 4 years. By what total percent does it decrease after the 4 years?

Answer 1

This is an example of exponential decay. At the end of each year, you will have 0.98 times the number you had at the start of the year.

A₀ = initial amount (at zero years)

A(n) = A₀ (0.98)ⁿ

n = number of years from when the value of A was A₀.

A(4) = A₀ (0.98)⁴ = 0.922 A₀ (with roundoff)

It decreased to 92.2% of its original value, which is a decrease of 7.8%.