although appealing to more refined tastes, art as a collectible has not always performed so profitably. assume that in 2015, an auction house sold a statute at auction for a price of $10,479,500. unfortunately for the previous owner, he had purchased it in 2011 at a price of $12,929,500. what was his annual rate of return on this sculpture

Question

Abel Perry

Business

7 September, 18:43

although appealing to more refined tastes, art as a collectible has not always performed so profitably. assume that in 2015, an auction house sold a statute at auction for a price of $10,479,500. unfortunately for the previous owner, he had purchased it in 2011 at a price of $12,929,500. what was his annual rate of return on this sculpture

+4

Answers (1)

Know the Answer?

Shyla Mayo · Answer 1

-5.12%

Explanation:

The annual rate of return can be determined using the future value formula given below:

FV=PV * (1+r) ^n

FV is the value of the sculpture in 2015 which is $10,479,500.

PV is the original value of $12,929,500.

n is the number of years the sculpture was owned which is 4 years

r is the unknown

10,479,500=12,929,500 * (1+r) ^4

10,479,500/12,929,500 = (1+r) ^4

0.810510847 = (1+r) ^4

divide the index on both sides by 4

(0.810510847) ^ (1/4) = 1+r

0.948832841 = 1+r

r=0.948832841 - 1

r=-5.12%