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20 January, 11:03

Although appealing to more refined tastes, art as a collectible has not always performed so profitably. During 2003, an auction house sold a sculpture at auction for a price of $10,331,500. Unfortunately for the previous owner, he had purchased it in 2000 at a price of $12,417,500.

What was his annual rate of return on this sculpture? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e. g., 32.16.)

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  1. 20 January, 11:28
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    -5.95%

    Explanation:

    A = P (1+r) ^n

    A is the auction price at which the sculpture was sold = $10,331,500

    P is the price the sculpture was purchased = $12,417,500

    n is the time interval between the year of sales and year of purchase

    10,331,500 = 12,417,500 (1+r) ^3

    (1+r) ^3 = 10,331,500/12,417,500

    (1+r) ^3 = 0.832

    1+r = (0.832) ^1/3

    1+r = 0.9405

    r = 0.9405 - 1 = - 0.0595 = - 5.95%
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