Finance-Formulas

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June 15th 2009, 03:03 AM
atom360

Finance-Formulas

Hello

My maths book does not provide the formula for finding the depreciation and inflation in questions such as...

Q.1) A particular car has a new value of $32 000. If we assume a constant annual depreciation rate of 12% what will the value of the car be when it is 5 years old.

Q2) What steady annual rate of inflation would cause the value of an item to rise from $2500 to $18400 in 25 years.

Q3)A particular house has a current value of $350 000. If we assume a constant annual inflation rate of 4.8% what will the value of this house be 2 years from now.

What is the formula for these questions?

Thank you
June 15th 2009, 04:44 AM
alexmahone

A1) $A=P(1-\frac{r}{100})^5$
$A=\$32,000(1-\frac{12}{100})^5$
$A=\$32,000*(\frac{88}{100})^5$
$A=\$16,887$
June 16th 2009, 07:27 PM
TKHunny

Quote:

Originally Posted by atom360

My maths book does not provide the formula for finding the depreciation and inflation in questions such as...

The intent of not providing such a thing might be encouragement for you to think on it.

If the value of a a car was $20,000 and it suffers 5% deflation in one year, what is the value of the car at the end of the year?

If the value of a house is $100,000 and it experiences 3% inflation over one year, what is the value of the house at the end of one year?

Can you answer these? Just one year!

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