A car's value depreciates by 20% each year. If the car's initial value is $25,00

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Question: A car\'s value depreciates by 20% each year. If the car\'s initial value is $25,000, what will be its value after two years?

Options:

Correct Answer: $16,000

Solution:

After the first year, the value is $25,000 - (20% of $25,000) = $20,000. After the second year, the value is $20,000 - (20% of $20,000) = $16,000.

A car's value depreciates by 20% each year. If the car's initial value is $25,000, what will be its value after two years?

A car's value depreciates by 20% each year. If the car's initial value is $25,000, what will be its value after two years?

Step 1: Start with the initial value of the car, which is $25,000.
Step 2: Calculate 20% of $25,000. This is done by multiplying $25,000 by 0.20, which equals $5,000.
Step 3: Subtract the $5,000 from the initial value. So, $25,000 - $5,000 = $20,000. This is the value after the first year.
Step 4: Now, take the new value of $20,000 and calculate 20% of it. Multiply $20,000 by 0.20, which equals $4,000.
Step 5: Subtract the $4,000 from the $20,000. So, $20,000 - $4,000 = $16,000. This is the value after the second year.

Depreciation – Understanding how the value of an asset decreases over time, specifically through a percentage reduction each year.
Percentage Calculation – Calculating a percentage of a given value and applying it to find the new value after depreciation.
Compound Depreciation – Recognizing that depreciation is applied to the new value each year, not the original value.