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 2 years?

Options:

Correct Answer: $16,000

Solution:

After 1 year: $25,000 - (0.20 * 25,000) = $20,000. After 2 years: $20,000 - (0.20 * 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 2 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 2 years?

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

Depreciation – Understanding how the value of an asset decreases over time, specifically through a percentage reduction.
Compound Depreciation – Recognizing that depreciation is applied to the new value of the asset each year, not the original value.