Question 272463: Kathy plans to purchase a car that depreciates (loses value) at a rate of 14% per year. The initial cost of the car is $21,000. Which equation represents the value, v, of the car after 3 years?
1) v = 21,000(0.14)^3
2) v = 21,000(0.86)^3
3) v = 21,000(1.14)^3
4) v = 21,000(0.86)(3)
I think it's either 1 or 2 but I'm not sure which one.
Answer by stanbon(75887)   (Show Source):
You can put this solution on YOUR website! Kathy plans to purchase a car that depreciates (loses value) at a rate of 14% per year. The initial cost of the car is $21,000. Which equation represents the value, v, of the car after 3 years?
1) v = 21,000(0.14)^3
2) v = 21,000(0.86)^3
3) v = 21,000(1.14)^3
4) v = 21,000(0.86)(3)
I think it's either 1 or 2 but I'm not sure which one.
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You are correct.
At the end of the 1st year you have 21,000-0.14(21000)
= (1-0.14)21000 = 0.86(21,000)
So after three years you have 21000(0.86)(0.86)(0.86)
= 21000(0.86)^3
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Cheers,
Stan H.
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