Answered

I'm having troubles with these 4 problems. I was wondering if someone could explain them to me. Thanks in advance!


Note: Cash prize is $25,000

  1. As you consider your decision you think about putting your cash prize in an account that earns simple interest at a rate of 2.1%. Enter the amount of money that would be in the account after 10 years. (Simple Interest Formula: I=prt , where "I" is the interest earned, "p" is the principal, "r" is the rate and "t" is the time in years). Round to the nearest whole dollar.

  2. As you consider your decision, you think about how most cars lose value over time. If a fully loaded Volkswagen Beetle depreciates at a rate of 15%, calculate the value of the car after 10 years if it is currently valued at $30,000. (Car Depreciation Formula: V=I(1−r)t where "V" is the value of the car after "t" years, "I" is the current value, "r" is the rate of depreciation). Round to the nearest cent.

  3. About how long can you keep the car and still sell it in order to make the same amount as the cash prize, $25,000?

  4. If you have to keep the car for one year, which would you choose (money or car)? In your explanation include the assumptions that you used to help in your decision.

I don't understand this at all, simply because I never learned this, but I want to pass my interim so any help would be appreciated.

Verified Answer :

meerkat18

6) Cash price: 25,000 ; r = 2.1% ; t = 10 years
S.I = Prt
S.I = 25,000 0.021 10 
S.I = 5,250

7) Current value: 30,000 ; dep rate = 15% ; t = 10 years
V = I (1-r)^t
V = 30,000 (1-0.15)^10
V = 30,000 (0.85)^10
V = 30,000 (0.19687)
V = 5,906.10

8) Assume that the car was bought at the beginning of the year.
year 1 beginning: 30,000
year 1 ending : 30,000 x 0.85 = 25,500
The car can only be kept for 1 year

9) S.I = 25,000 x 0.021 x 1 = 525
25,000 + 525 = 25,525

Value of car after 1 year = 25,500

Choose the money. It earns interest and its value appreciates whereas the car depreciates.

Related Questions