A home stereo depreciates by 20% each year. What’s the value of a stereo, purchased new for $1,200, after two years?

The stereo depreciates $240 the first year (0.2 × 1200 – 240).
Therefore, the value of the stereo after the first year is $1200 – $240 = $960.
The second year the stereo would depreciate by $192 (0.2 × 960). The value of the stereo after the second year is $960 – $192 = $768.