An art collector buys a painting at an initial cost of 20000

An art collector buys a painting at an initial cost of $200,000. A year later he sells the painting for $215,400. What rate of return does he achieve?

Solution

Rate of return he achieves:

Rate of return = (Selling price / Initial cost)^Years -1

Rate of return = (215400 / 200000)^1 -1

Rate of return = 7.70%