Step-by-step explanation:
The price of car purchased 5 years ago = 15000
The price of car sold = 7000
By compound depreciation,
[tex]Pn = P (1 - R/100) ^ T[/tex] ... (1)
where Pn = 7000
P = 15000
R = rate of interest to be calculated
T = 5 ( number of years)
substituting the values in equation (1), we get
[tex]7000 = 15000 (1 - R/100) ^ 5[/tex]
[tex]0.46 = (1 - R/100) ^ 5[/tex]
[tex]0.858 = 1 - R/100[/tex]
0.858 is rounded off as 0.86
R/100 = 0.14
By simplifying the above equation, we get
Rate of depreciation = 14%
