Choose the one alternative that best completes the statement or answers the question.
-Tracey bought a diamond ring appraised at $1,700 at an antique store. If diamonds have appreciated in value at an annual rate of 10%, what was the value of the ring 10 years ago? (Round your answer to the nearest dollar.)
A) $230
B) $655
C) $625
D) $4,409

Question

Quizplus · Accepted Answer

To find the value of the ring 10 years ago, we use the formula for exponential decay, which is the inverse of exponential growth: $P = P_0(1 + r)^{-t}$, where $P$ is the future value, $P_0$ is the initial value, $r$ is the rate of appreciation, and $t$ is the time in years. Rearranging to solve for $P_0$, we get $P_0 = P / (1 + r)^t$. Plugging in the values: $P_0 = 1700 / (1 + 0.10)^{10}$, which calculates to approximately $655 when rounded to the nearest dollar.

Choose the One Alternative That Best Completes the Statement or Answers