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Compound Interest vs Depreciation Rate Difference Problem
3 Replies
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1000(1+CI)3 = 1728(1-3D) if depreciation happens linearly over years (general practice). Then answer is 2.33 1000(1+CI)3 = 1728(1-D)3 if depreciation is compounded (not usual practice). Then answer is 2
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ompounded Value = Depreciated Value. so, (1331/1728)⅓ = 11/12 so, depreciation rate = 1/12 = 8⅓% and compounding rate = 10% so difference = 1⅔% ≈ 2% (d).
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