Question

Naman purchased an old bike for Rs. 20000. If the cost of his bike is depreciated at a rate of 5% per annum, then find out the cost of the bike after 2 years?
A. Rs. 18050
B. Rs. 15000
C. Rs. 1900
D. Rs. 18000

Answer 1

Hint: We are asked to find out the cost of the bike after 2 years with depreciation given. Given the initial price and depreciation we can find the cost by using the formula directly available. Then only thing that we have to put the value and get the answer.

Complete step-by-step answer:
Initial cost of bike is Rs. 20000
Time is 2 years
And rate of depreciation is 5%
∴ Cost of bike after 2 years = initial price ×\[{\left( {1 - \dfrac{{rate{\text{ }}of{\text{ }}depreciation}}{{100}}} \right)^{time}}\]
=\[20000 \times {\left( {1 - \dfrac{5}{{100}}} \right)^2}\]
= \[20000 \times {\left( {\dfrac{{19}}{{20}}} \right)^2}\]
= 18050
Thus, the cost of bike after 2 years is Rs. 18050
∴Correct option is ‘A’.

Note: Some of the questions are asked directly where we only have to put the value and get the answer. Their key point here was to know the depreciation which was to be subtracted from standard increment considered as 1.