Question

You buy a used car for 6599. Its value decreases by 12% every year.

Answer 1

For a, the starting value (intercept) is 6599. The depreciation rate 12%/year. This is where the function y = 6599(1-(rate)^t) comes into play. 6599 is the starting price, rate is the 12%, and t is the time in years. So the equation is: y = 6599(0.88)^t. For part b, simply plug 2.5 in for t which results in $4,794. For part c, same deal, plug in 20 for t, which results in $512. For part d, you have to take the anti-log where 2000 = 6599(0.88)^t... divide both sides by 6599... 2000/6599 = (0.88)^t. Which is approximately 8.5 years.