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March 27, 2017

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The effect of depreciation can be computed using a formula similar to the formula for compound interest.
a. Assume depreciation is the same each month. Write a problem involving depreciation and solve it.



b. Develop a general formula for depreciation defining what each variable in the formula stands for.

  • math 213 - ,

    This is not straight line depreciation but a constant percentage depreciation per month.

    let value after a month be d times value the month before. (like 0.97 or something)

    Then value after n months = original value * d^n

    for example if I buy a $500 appliance
    and d = .97 per month
    then after 2 years
    value = 500(.97)^24
    = 500(.481)
    = $ 241

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