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23 July, 14:16

At the band's peak of popularity, a signed black diamond poster sold for $500. three years later, the band was almost forgotten, and the poster was worth only $10. what is the annual rate of depreciation for the poster

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  1. 23 July, 15:09
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    The answer to this question would be 72.8%

    In this case, you are given the initial price ($500), the final price ($10) and the elapsed time (3 years). You are asked to find the annual or yearly rate of depreciation. The calculation should be:

    Final price = initial price * (100% - depreciation rate) ^ (elapsed time/time unit of depreciation)

    $10 = $500 * (100% - depreciation rate) ^ (3/1)

    (100% - depreciation rate) ^3 = 10/500 = 1/50

    depreciation rate = 1/3.68 - 100 = - 72.8%

    Every year the poster is losing 72.8% value (the value is turned into 27.2%)
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