0
A=P(1-r)n
Where P= principal
r= rate of depreciation
n=number of terms (years)
Compare with compound interest: A=P(1+r)n
Example : a TV originally worth $1250 depreciates at 6% pa.
- What is it worth after 7 years?
A=P(1-r)n
P=$1250
r=6% =0.06
n=7years
A=1250 (1-0.06)7
A=1250 (0.94)7
A=1250 x 0.648
A=$810.60
The TV is worth $810.60 after 7 years.
- By how much has the TV depreciated over this time?
Original value: $1250
Current value: $810.60
Depreciation = $1250-$810.60
=$439.40
The TV has depreciated by $439.40 in 7 years.
Ex 4j
- A=P(1-r)n
P=$2800
r=25% =0.25
n=3years
What else can I help you with?
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