Everything Maths Grade 11

CHAPTER 6. FINANCE 6.4

Example 3: Compound Depreciation

QUESTION

The flamingo population of the Berg river mouth is depreciating on areducing balance at a

rate of 12% p.a. If there are now 3 200 flamingos in the wetlands of the Berg river mouth, how

many will there be in 5years’ time? Answer to three significant figures.

SOLUTION

Step 1 : Determine what has been provided and what is required

P = 3 200

i = 0, 12

n = 5

A is required

Step 2 : Determine how to approach the problem

A = P(1− i)n

A = 3 200(1− 0 ,12)^5

Step 3 : Solve the problem

A = 3 200(0,88)^5

= 1688, 742134

Step 4 : Write the final answer

There would be approximately 1 690 flamingos in 5 years’ time.

Example 4: Compound Depreciation

QUESTION

Farmer Brown buys a tractor for R250 000 which depreciates by 20% per year using the com-

pound depreciation method. What is the depreciated value of the tractor after 5 years?