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When you buy a new car, you must either pay the entire sum in cash or take a loan where you agree to pay for the car over time. Unfortunately, a car loses value as soon as you drive it off the lot, and it continues to lose value as it ages.
Handan's parents bought her a car for $16,500 and expect that the car will lose approximately 25% of its value each year.
What exponential decay function represents this situation?
Buying a car is not an investment. When you invest in something, you expect the value of the item to grow over time. Other examples of growth over time include paper folding, population growth, and the spread of a virus through a population. When the value of an item decreases over time, it is said to decay. These situations can be modeled by exponential decay. We will use an exponential decay function to answer the question about Handan’s car later in the lesson.
Exponential decay can be seen not only in the value of a car, but also in decreasing populations, in the amount of radiation over time coming from radioactive materials, and in sports tournaments as teams or players are eliminated. In this lesson, you will learn more about exponential decay functions including how to create, graph, and interpret them.
