You purchased an automobile a year ago for $10,000. Its current market price is $6,000, and the expected market value one year from now is $4,000. If the interest rate is 10 percent, how much will it cost you to keep the car for an additional year (over and above operation and maintenance costs)?

Question

Quizplus · Accepted Answer

The cost to keep the car for an additional year is the difference in market value ($6,000 - $4,000 = $2,000) plus the opportunity cost of the interest on the current market value ($6,000 * 10% = $600), totaling $2,600.

You Purchased an Automobile a Year Ago for $10,000