Homework SourseAlthough appealing to more refined tastes art as a collectib
Although appealing to more refined tastes, art as a collectible has not always performed so profitably. During 2003, a sculpture was sold at auction for a price of $10,305,500. Unfortunately for the previous owner, he had purchased it in 1999 at a price of $12,376,500. What was his annual rate of return on this sculpture?
rev: 09_17_2012
-3.80%
-4.03%
-5.06%
-4.47%
4.68%
References
eBook &
| Although appealing to more refined tastes, art as a collectible has not always performed so profitably. During 2003, a sculpture was sold at auction for a price of $10,305,500. Unfortunately for the previous owner, he had purchased it in 1999 at a price of $12,376,500. What was his annual rate of return on this sculpture? |
Solution
We use the formula:
A=P(1+r/100)^n
where
A=future value
P=present value
r=rate of interest
n=time period
10,305,500=12,376,500(1+r/100)^4
(10,305,500/12,376,500)^(1/4)=(1+r/100)
(1+r/100)=0.95525
r=(0.95525-1)*100
=-4.47%(Approx)(Negative).
